Problem 1:
Clarion Co has a beta of 0.895. If the expected market return is 10.6% and the risk-free rate is 3.4 %, what is the appropriate required return of Clarion Co using CAPM?
Problem 2:
Helen received 12,345 $ for his services as a consultant to the mayor’s office of his hometown of NY. She has invested his money into an account paying 3,98% annual interest and left the account in his will to the city of NY on the condition that the city could not collect any money from the account for 200 years. How much money will the city receive in 200 years from Helen’s generosity? Picture the problem, decide on a solution strategy, solve and analyze.
Problem 3:
You just received a bonus of 5,000 $.
a) Calculate the future value of 5,000 $ given that it will be held in the bank for 5 years and earn an annual interest rate of 6%.
b) Recalculate part “a” using a compound period that is 1) semiannual and 2) bimonthly.
c) Recalculate part “a” using a time horizon of 12 years at an annual interest rate of 19%
Problem 4 :
From the following price data, compute the annual rates of return for Lukas Co and Kruger Co companies:
Time Lucas Co Kruger Co
1 10 $ 30 $
2 12 28
3 11 32
4 13 35

How would you interpret the meaning of the annual rates of return?
Problem 5:
According to Foundations and Principles of Finance explain why “Cash Flow is the Kind”.