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Question 1. A bank is offering 12% compounded quarterly. If you put $100 in an account, how...

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Finance

Question
1. A bank is offering 12% compounded quarterly. Ifyou put $100 in an account, how much will you have
at the end of one year? What is the effective annual rate? How muchwill you have at the end of two
years?
2. The Constant Company has just paid a dividendof $0.30 per share. The divided grows at a steady rate
of 8% per years. What will the dividend be in 5 years?(2marks)
3. We have invested in the portfolio below with50% in Share A, 25% in share B and 25% in Share C. What
is portfolio return when the economy is boom? What is the expectedreturn of the portfolio? What is the
standard deviation of the portfolio?
Returns
Share A Share B Share C Economy Probability
10% 15% 20% Boom 0.4
8% 4% 0% Bust 0.6

Answer & Explanation Solved by verified expert
4.3 Ratings (571 Votes)
1 EAR 1 stated rateno of compounding periods no of compounding periods 1 100 Effective Annual Rate 112410041100 Effective Annual Rate 1255 Price in 1 year Future value present value1 ratetime Future value 100101255091 Future value 11255 Price in 2 years Future value present value1 ratetime Future value 100101255092 Future value 12668 2 Future value present value1 ratetime Future value 0310085 Future value 044 3 Portfolio return in economic boom Expected return Wt Share A Return    See Answer
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Transcribed Image Text

Question1. A bank is offering 12% compounded quarterly. Ifyou put $100 in an account, how much will you haveat the end of one year? What is the effective annual rate? How muchwill you have at the end of twoyears? 2. The Constant Company has just paid a dividendof $0.30 per share. The divided grows at a steady rateof 8% per years. What will the dividend be in 5 years?(2marks)3. We have invested in the portfolio below with50% in Share A, 25% in share B and 25% in Share C. Whatis portfolio return when the economy is boom? What is the expectedreturn of the portfolio? What is thestandard deviation of the portfolio?ReturnsShare A Share B Share C Economy Probability10% 15% 20% Boom 0.48% 4% 0% Bust 0.6

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