3. Suppose the annual interest rate is 4%.

a) What is the present value of the following uneven cash flow stream?

b) What is the FV of these cash flows

0 1 2 3 4 Years

|

4%

| | | |

0 100 300 300 -50

4. Suppose today is January 1, 2018, and the investors expect the annual risk-free interest rates in 2018 through 2020 to be:

Year	One-Year Rate (Rrf)
2018	2.2%
2019	1.8
2020	2.9

What is the yield to maturity for Treasury bonds that mature at the end of a) 2019 (i.e., a two year bond) and b) 2020 (i.e., a three-year bond)? Assume the bonds have no risks.