a. Suppose that I receive a payment of $300,000 in three years. If interest rates are 5%, then what is the present value today of the future payment?

b. A simple discount bond pays $1,000,000 in one year. Find the yield to maturity when the price of the bond is

i. $900,000

ii. $990,000

iii. $1,000,000

What happens to the yield to maturity as the price of the bond increases?

c. How much would investors be willing to pay for a perpetuity that that pays $10,000 per year if interest rates are 4%?