For Archmage ONLY

9.9: Assume that you just won $35 million in the Florida lottery, and hence the state will pay you 20 annual payments of $1.7 million each beginning immediately. If the rate of return on securities of similar risk to the lottery earning (e.g. the rate on 20-year U.S. Treasury bonds) is 6 percent, what is the percent value of your wining?

9.11: Consider the following investment cash flows:

Year	Cash Flow
0	($1000)
1	250
2	400
3	500
4	600
5	600

a. What is the return expected on this investmentmeasured in dollar terms if the opportunity cost rate is 10 percent?

b. Provide an explanation, in economics terms, of your answer.

c. What is the return on this investment measured in percentage terms?

d. Should this investment be made? Explain your answer.

Chapter 10

10.5: several years ago, the Value Line Investment Survey reported the following market betas for the stocks of selected healthcare providers:

Company	Beta
Quorum Health Group	0.90
Beverly Enterprise	1.20
HealthSouth Corporation	1.45
United Healthcare	1.70

At the time these betas were developed, reasnoble estimates for the risk-free rate, RF, and required rate of return on the market, R(Rm), were 6.5 percent and 13.5 percent, respectively.

a. What are the required rates of return on the four stocks?

b. Why do their required rates of return differ?

c. Suppose that a person is planning to invest in only one stock rather than a well-diversified stock portfolio. Are the required rates of return calculated above applicable to the investment? Explain your answer.