Assume that capital markets are perfect. Find the present day price of the following cash streams.
(a) You will be paid $100 in 5 years for sure and the annual interest rate is 10%.
(b)You will be paid $100 in 5 years with probability 1/2, $50 with probability 1/2, and the annual interest rate is 10%.
(c) You will be paid $100 in 1 year for sure. The annual interest rate is subject to uncertainty and will be 15% with probability 1/2 and 5% with probability 1/2.