a. Jarvis University (JU) is a private, multi-program U.S University with a $2billion endowment fund. JU is heavily dependent on its endowment fund to support ongoing expenditures. The endowment fund must make $126 million annual contribution, which is indexed to U.S education cost inflation index (which is at 3%). The endowment fund has also budgeted $200 million to construct a new library.

(i) What is JU required return?

(ii) What is JUs risk tolerance?

(iii) Outline JUs five constraints

b. Calculate the bond equivalent yield for a 180-day T-bill that is purchased at a 6% "ask" rate. If the bill has a face value of $10,000, calculate its price.

c. A bill has a bank discount yield of 6.81% based upon the asked price, and 6.90% based upon the bid price. The maturity of the bill (already accounting for skip-day settlement) is 60 days.

Calculate the bond equivalent yield of the bill as well as its effective annual yield based upon the asked price.