Q1. You are buying a house at $1,200,000 today. What is the expected value of this house 10 years from now if the value (price) of this house appreciates by 6% annually - compounded monthly? Ignore any other factor/s not mentioned in this case.

a. FV = 1,200,000 * [(1 + .005)^120]

b. FV = 1,200,000 * [(1 + .06)^10]

c. Less than $ 1,200,000

d. b and c

e. None of the above. My answer is $ .

Q2. You parents need $150,000 each year for their retirement for the next 20 years. The Prudential Insurances offers an annuity contract that yields 6% each year. They should buy an annuity contract today in the amount of:

a. $573,496.06

b. $1,720,488

c. More than 1,800,000

d. Less than 1,700,000

e. None of the above. My answer is $ .

Use the following information for questions 3-5. The expected rates of return are 10%, 12%, 16%, 8% and 2%. There are equal probabilities in each case.

Q3. The standard deviation for the rates of return are approximately:

a. .00010

b. .0214

c. .04626

d.. None of the above. My answer is ..

Q4. In the above case, for every 100 units of reward (return) there are

a. 10 units of risk

b. 20 units of risk

c. 30 units of risk

d. None of the above. My answer is .