Subject: Financial Management

Sacred Heart University - USA

2. A stock price is currently $10 and is expected to be $15 in 4 years. What is its expected
   1. Period rate of return?
   2. Annual rate of return?

3. If investors become less risk averse, what should happen to asset prices? Why?

4. Suppose investors were the opposite of impatient: they would rather have an amount of money in the future rather than have that amount today. In this case, would the risk-free rate be positive, negative, or zero? Explain.

5. Define the term investment. One reason an individual might choose to invest is to make a profit. Give two other reasons, as discussed in class, individuals might choose to invest.