1. Last year you invested $1,000 in an asset that paid no distributions during the year but is now selling for $1,300. If the rate of inflation was 3%, what was your real rate of return?

a. 27.00% b. 30.00% c. 29.13% d. 30.90% e. None of the above

2. Asset X pays $50,000 one year from today, $50,000 two years from today, and $150,000 three years from today. Asset Y pays nothing until it pays a single payment of $150,000 exactly 3 year from today. Which statement is correct comparing Asset X to Asset Y?

a. Asset X has a higher Macaulay's duration, and its present value is less sensitive to the discount rate use.

b. Asset X has a higher Macaulay's duration, and its present value is more sensitive to the discount rate use.

c. Asset Y has a higher Macaulay's duration, and its present value is less sensitive to the discount rate use.

d. Asset Y has a higher Macaulay's duration, and its present value is more sensitive to the discount rate use.