Solutions to Chapter 1

(m = 12/yr) 1.00712 ( 1 = 0.0873 = 8.73% Choose the 8.4 percent loan for its slightly lower effective rate. ... of return Treasury bills 4.0% 3.0% 0.97% Treasury bonds 5.3% 3.0% 2.23% Common stocks 11.6% 3.0% 8.35% 6. The nominal interest rate cannot be negative. ... of risky investments will fall until the expected rates of return on those ... ................
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