1. Explain why the capital expenditure build-up in the unconventional oil and gas sector was heavily financed by debt

2. For a present sum of $800,000, determine the annual worth (in then-current dollars) in years 1 through 8 if the market interest rate is 12% per year and the inflation rate is 4% per year.

The annual worth is $.

3. If Danny buys a 1-year T-bill with a yield of 3% that reflects an Inflation Premium of 1%, and Karen buys a 2-year T-note yielding 4% each year, what is the expected rate of inflation in the second year of Karen's note (assuming the real rate of interest holds constant over the two years)?

a. 1%

b. 4%

c. 3%

d. 2%