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Annuity and Capital Asset Pricing
From Chapters 5 and 6 complete Study Problems 5-6 (page 162) and 6-4 (page 196) and post the answers to the
discussion board. Remember to complete all parts of the problems and report the results of your analysis. Do not forget to
show the necessary steps and explain how your attained that outcome. Respond to at least two of your classmates’
postings.
5-6. (Present value of an annuity) What is the present value of the following
annuities?

1
1
(1 )
n
annuity
r
PV C
r
+
= ×
=
10
1
1
(1.07)
$2,500
0.07
×
= $2,500 × 7.024
= $17,560


3
1
1
(1.03)
$70
0.03
×
= $70 × 2.829

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= $198.03


7
1
1
(1.06)
$280
0.06
×
= $280 × 5.582
= $1,562.96


10
1
1
(1.10)
$500
0.10
×
= $500 × 6.145
= $3,072.5
6-4.(Required rate of return using CAPM)
a. Compute a fair rate of return for Intel common stock, which has a
1.2 beta. The risk-free rate is 6 percent, and the market portfolio
(New York Stock Exchange stocks) has an expected return of 16
percent.

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Annuity and Capital Asset Pricing From Chapters 5 and 6 complete Study Problems 5-6 (page 162) and 6-4 (page 196) and post the answers to the discussion board. Remember to complete all parts of the problems and report the results of your analysis. Do not forget to show the necessary steps and explain how your attained that outcome. Respond to at least two of your classmates' postings. 5-6. (Present value of an annuity) What is the present value of the following annuities? a. $2,500 a year for 10 years discounted back to the present at 7 percent = = $2,500 ? 7.024 = $17,560 b. $70 a year for 3 years discounted back to the present at 3 percent = = $70 ? 2.829 = $198.03 c. $280 a year for 7 years discounted back to the present at 6 percent = = $280 ? 5.582 = $1,562.96 d. $500 a year for 10 years discounted back to the present at 10 percent = = $500 ? 6.145 = $3,07 ...
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