3) Valuation a) What is the present value of a bond that pays $500 next year and $10,000 in two years if the current interest rate is 6%? b) What is the present value of a perpetuity that pays $100 per year forever if the current interest rate is 4%? c) What was the return in period 1 to a stock whose price increased from $11 (in period 0) to $13 (in period 1), and which issued a dividend of .35 in period 1? d) Currently, the risk free rate of return is 3% and the rate of return on the market portfolio is 10%. According to CAPM, what is the expected return for an asset with a Beta of 1.3? e) Currently, the risk free rate of return is 0.01. Using the three-factor model, calculate the expected return to an asset with the following three quantities and market prices of risk: b = 0.02; b = 0.03; b3 = 0.15; A = 0.25; A = 0.1; A3 =0.4