Please answer 1 though 6!!!

1. What is a satisfactory investment? When the present value of benefits exceeds the cost of an investment, what can you conclude about the rate of return earned by the investor relative to the discount rate?

2. Define internal rate of return. When is it appropriate to use IRR rather than the HPR to measure the return on an investment?

3. Differentiate among the three basic risk preferences: risk-indifferent, risk-averse, and risk-seeking. Which of these attitudes toward risk best describes most investors? How do you define yourself when it comes to dealing with risk?

Problem sets: Show your work, not just answers for full grades.

4. An investor buys a bond for $10,000. The bond pays $200 interest every six months. After 18 months, the investor sells the bond for $9,500. Describe the types of income and/or loss the investor had.

5. Given a real rate of interest of 2%, an expected inflation premium of 3%, and risk premiums for investments A and B of 4% and 6%, respectively, find the following.

1. The risk-free rate of return, r_f
2. The required returns for investments A and B

6. Assume you can earn 7% on the investments described below. How much money would each investment provide for you after six years?

1. Invest $5,000 as a lump sum today.
2. Invest $2,000 at the end of each of the next six years.