Author Question: What is the present value of a series of 5,000 end-of-the-year cash flows to be received forever if ... (Read 55 times)

cartlidgeashley

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What is the present value of a series of 5,000 end-of-the-year cash flows to be received forever if the required rate of return is 6.00 per year and the first cash flow is one year from today?
 
  A) 8,333.33
  B) 83,333.33
  C) 300.00
  D) This question cannot be answered because there is no time period provided.

Question 2

Green Company stock has a beta of 2 and a required return of 23, while Gold Company stock has
  a beta of 1.0 and a required return of 14. The standard deviation of returns for Green Company is
  10 more than the standard deviation for Gold Company.
 
  The expected return on the market
  portfolio according to the CAPM is
  A) 9. B) 14. C) 10. D) 12.



Expo

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Answer to Question 1

B
Explanation: B) PV = PMT/r = 4,000/.06 = 83,333.33

Answer to Question 2

B



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