1. Contrast the three primary categories of cash flows provided in the statement of cash flows. Your response should be at least 250 words in length.

2. Future value of single sum problem. You put $1,000 in an investment account today which will earn 7% over the next 20 years, what is the future value?

3. Calculate a table of interest rates based on the following information: The pure interest rate is 2.5% Inflation expectations for year 1 = 2%, year 2 =4%, years 3-5 =5% The default risk is .1% for year one and increases by .1% over each year Liquidity premium is 0 for year 1 and increases by .15% each year

4. Valuation – convertible bond. You purchased one of Big Corp.’s 8%, 10-year convertible bonds at its $1,000 par value a year ago when the company’s common stock was selling for $20. Similar bonds without a conversion feature returned 12% at the time. The bond is convertible into stock at a price of $30. The stock is now selling for $35. Assume no dividends.

a) You exercise the conversion feature today and immediately sold the stock you received. Calculate the total return on your investment.

5. Risk and Return, Coefficient of Variation. Based on the following information, calculate the coefficient of variation and select the best investment based on the risk/reward relationship:

Std Dev. Exp. Return

Company A 10.4 13.2

Company B 7.6 8.7