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Compute the fair price of the following asset, assuming a constant discount rate of r = 10%. Annual cash flows of $10 for the first

  1. Compute the fair price of the following asset, assuming a constant discount rate of r = 10%.
    1. Annual cash flows of $10 for the first three years, no cash flows in the next two years, and starting in year six cash flows of $20 per year forever
    2. Price the same asset but assume that the $20 per year forever grow at a constant rate of 5% (i.e. the cash flow in year seven is $20 1.05, etc.).

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