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1)You just won the lottery

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1)You just won the lottery. Congratulations! The jackpot is $85,000,000, paid in 10 equal annual payments. The first payment on the lottery jackpot will be made today. In present value terms, you really won assuming annual interest rate of 9.50%.

2)You are given the following information on the future states of the economy and returns for 2 risky securities i and j. Assume that the Risk-Free rate of interest is 2.0% per year. Scenario Probability Very Good 25.00% Return for Security Return for Security i j -20.00% 5.00% 10.00% 20.00% 30.00% -12.00% Good 25.00% 25.00% Average Poor 25.00% 50.00% 9.00% Compute the following items:

1, Client Harry walks in with $100 and wants an Expected Return of 8.0% in the next year.

How much should Harry invest in the Risk-free rate?( 1 DP: e.g.: $1234.5)

2, How much should Harry Invest in Security i? (1 DP: e.g.: $1234.5)

3, How much should Harry Invest in Security j? (1 DP: e.g.: $1234.5)

4, What is Harry's Portfolio's Standard Deviation? (4DP: e.g.: 0.1234)

5, Client Bill walks in with $1,000,000 and wants a Standard Deviation of 10% in the next year.

What is Bill's Expected Return?( 4DP: e.g.: 0.1234)