Note: You need to draw a time-line if needed, specify your formula and the steps of your calculation. 1) Suppose Tom borrows \\( \\$ 4,000 \\) for one year from his grandfather who charges Tom 7 percent interest. Calculate how much Tom will have to repay his grandfather at the end of the year. ( 5 pts.) 2) Suppose a two-year coupon bond has payments of \\( \\$ 50 \\) and a face value of \\( \\$ 900 \\). The interest rate is 9 percent. What is the price of this bond? (6 pts.) 3) Suppose you negotiate a one-year loan with a principal of \\( \\$ 1000 \\) and the nominal interest rate is currently 5 percent. You expect the inflation rate to be 2 percent over the next year. When you repay the principal plus interest at the end of the year, the actual inflation rate is \1.5. Compute the ex ante and ex post real interest rate. Who benefits from this unexpected decrease in inflation? Who loses? (8 pts.) 4) Calculate the risk of an asset that requires a \\( \\$ 1,000 \\) investment, but will return \\( \\$ 850 \\) half of the time and \\( \\$ 1,250 \\) the other half of the time. Hint: You need to calculate the standard deviation. (10 pts.)