1. Welma wants to buy an elephant but she does not currently have the 14,000 required to buy the type of elephant she wants.

1. If she hopes to buy the elephant at this same price in three years, how much does she need to invest in 5% annually compounding T-bills at this moment in time to have enough money in three years? (Online fill in 1)
2. Assume that in three years elephants now cost $16,000. If elephants are good representations of current inflationary pressures. What is the effective yearly real rate of return on the T-bills?(Online fill in 2)

1. Jack and Diane, grew up in the heartland, have now been married for 20 years and would like to invest some money. Assume the risk free rate is 2% annually. They take a test that rates their individual risk preference. Jack is given a 5 and Diane a 2.(this is A in the equation 5.15 in the book) A- Which investment can the couple agree on, that it is better than the risk free asset? (online fill in 3) B- Using the stock that Jack and Diane have chosen in part B of question find the optimal allocation between risky(y) and risk free(1-y) investments for each person, with no shorting. What is the optimal y for Jack?(online fill in 4)