What is the purpose of interest?

The variance of Firm A is 8%. The variance of firm B is 10%. Firm B should have a higher required return." True or false. Why?

What is risk aversion? Why would this affect the fair return?

A. You have decided that you can save $5000 per year. The rate is 6%. How much will you have accumulated after 10 years? B. You put $210000 in an account earning 10%. How long until it grows to $1000000?

A. You are in my will! When I die you will receive $21,000. The fair return is 5%. What is the value of your inheritance now if I am expected to live for 10 more years? B. You owe me $125128 but can only pay me $12,000 per year. If the agreed upon rate is 7%, how long will it take to repay me?

Timco is twice as risky as the market. The market is expected to earn 11%. The risk free rate is 2%. You think Timco can earn 15%. Should you invest in Timco? Why or why not? Show numbers to justify your decision.