(3) Suppose one share of Google stock will earn $5 in one year $8 in the second year $10 in the third year The interest rate i = .05. What is the present value of the three-year stream of payments? (4) Suppose one share of Amazon cams and pays out $10 per year and will do so forever. The interest rate is .04. a) What is the present value of this earnings stream? What is the PIE (price to current earnings) ratio? b) Suppose alternatively that one share of Amazon will not earn anything for the rst three years, and then earn $10 per year each year thereafter. What is the present value of this earnings stream? (HINT: This earning stream is equivalent to an innite stream of $10 starting immediately, minus some amounts for the rst three years that should be subtracted). (5) Suppose you win the lottery. You have a choice between receiving $50,000 per year forever (assume you live forever, or can pass on the annual payment) or an immediate payment of $1,200,000. a) which should you choose if the interest rate is 3%? If it is 6%? b) for what range of interest rates should you take the immediate payment? (6) The interest rate is 5%. IBM stock pays annual dividends that start at $10 next year and then grows by 2% every year thereafter, forever. 3) What should be the price of IBM stock? What is the PIE ratio? b) What should its price be if dividends grow at 3% per year? What is the PIE ratio now