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12. An asset promises to pay $60 in each of the next three years. Assume the rate of discount is 5% for each of the

12. An asset promises to pay $60 in each of the next three years. Assume the rate of discount is 5% for each of the years.

a) Calculate its price the long way; i.e., just as you have been doing for #10 and #11, by discounting each future cash flow and summing.

b) Calculate its price using the annuity formula.

13. For the annuity in #12, what happens to it price if the rate of discount increase to 6%?

14. For the annuity in #12, what happens to it price if: a) its maturity is raised to four years? b) it never matures (a perpetuity)?

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