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# 1.a.) Assume you get all the answers correct, what is the expected value of this assignment?

1.a.) Assume you get all the answers correct, what is the expected value of this assignment? Please show your work (page 28). 4 pts.

1.b.) Again, assuming you do everything correctly, what is the standard deviation of the value of the assignment? Please show your work (page 29). 6 pts.

2.) Assume that in your academic past you have received 80% on all the Extra Credit assignments you have submitted, does this additional information change the values in 1.a. and 1.b. above? Why or why not? 4 pts.

3.a.) Is your completed assignment a security? Why or why not?  3 pts.

3.b.) What is the lowest amount of money you would accept for your assignment with the understanding that if you sell it you cannot submit it (or sell another copy of it)? 2 pts.

4.) On August 30, 2017, Dave borrows \$500 from Eric. Dave agrees (and signs a piece of paper—a Dave Bond–memorializing these arrangements) that he’ll pay Eric or whomever holds the Dave Bond \$50 every year for two years (that is \$50 on Aug. 30, 2018, and \$50 on Aug. 30, 2019) and on August 30, 2019, he’ll also pay back the \$500.

a.) What is the current yield over the first year? Please show your work (page 26). 4 pts.

b.) On August 30, 2018, Eric collects \$50 from Dave and then sells the ‘Dave Bond’ for \$400 to the highest bidder, Kandi. What are Eric’s Capital gain and capital gains yield? (page 26). Please show your work. 4 pts.

c.) Kandi, the buyer of the Dave Bond, presents it to Dave on August 30, 2019. Dave pays off. What are the current yield, capital gains yield, and Return on the Dave Bond for Kandi? Please show your work (pages 26 and 27) 6 pts.

5.) What factors may explain why Eric was only able to sell the Dave Bond for \$400? (Chapter 2—you find it). 4 pts.

6.a.) When Dave sold the shiny new Dave Bond to Eric on August 30, 2017, was that in a primary or secondary market? 2 pts.

6.b.) When Eric sold the Dave Bond to Kandi on August 30, 2018, was that in a primary or secondary market? 2 pts.

7.) Numerical exercise number 12 on page 35 of your text (page 22 and some thought). 6 pts.

8.) Thinking about the evolution of things that have or do serve as money, why have (virtually) valueless (in terms of what they’re made of) monies replaced real, full-bodied, commodity monies? 4 pts.

9.) Numerical exercise #13 on page 51. 4 pts.

10.) Analytical problem #16 on page 51. 4 pts.

11.) Dave holds a suitcase full of \$100 bills worth \$1,000,000. He plans to hold them for five years (This Dave really does NOT hold any \$100 bills!) What are the risks associated with this ‘investment’ strategy? Please explain. (Chapter 3). 6 pts.

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