Information on a prospective investment for Wells Financial Services is given below. Period 1 2 3 4 Loan Funds Available 3000 7000 4000 5000 Investment Income (% of previous period's investment) Maximum Investment Payroll Payment 110% 112% 113% 4500 8000 6000 7500 100 120 150 100 In each period, funds available for investment come from two sources: loan funds and income from the previous period's investment. Expenses, or cash outflows, in each period must include repayment of the previous period's loan plus 8.5% interest, and the current payroll payment. In addition, to end the planning horizon, investment income from period 4 (at 110% of the investment) must be sufficient to cover the loan plus interest from period 4. The difference in these two quantities represents net income, and is to be maximized. How much should be borrowed and how much should be invested each period?

You are the manager of the Mighty Fine mutual fund. The following table reflects the activity of the fund during the last quarter. The fund started the quarter on January 1 with a balance of $100 million. Mighty Fine Mutual Pund Monthly Data (measured at end of month) February -4.3 6.20 March January 5.5 Net inflows ($ million) HPR () -4.30 1.80 Required: a. Calculate the quarterly arithmetic average return on the fund. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Arithmetic average 1.23 % b. Calculate the quarterly geometric (time-weighted) average return on the fund. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Geometric average 1.14 % c. Calculate the quarterly dollar-weighted average return on the fund. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Dollar-weighted average return

2. An investor has a principal amount of $P. If he Interest Rate per Year desires a payout (return) of 0.1P each year, how many years will it take to deplete an account that earns 8% 4% 6% 8% 10% Payout per Year 10% (% of principal) 20% 30% 20.9 per year? 0.1P = P(A/P, 8%, N), so N ~= 21 years. A payout duration table can be constructed for select payout percentages and compound interest rates. Complete the following table. (Note: table entries are years.) Summarize your conclusions about the pattern observed in the table. (5.5)

A zero-coupon bond has a yield to maturity of 5% and a par value of $1,000. If the bond matures in16 years, it should sell for a price of __________ today.