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(Simple cash flow) Assume we are at period 0. The current interest is r. Define x= 1 1+r (a) Derive the present value Sn of
(Simple cash flow) Assume we are at period 0. The current interest is r. Define x= 1 1+r (a) Derive the present value Sn of the following cash flow in terms of x and n: 4 n Period 0 Cash flow 1 1 2 3 3 | 32 | 33 34 3n (b) Derive the present value S of the following (infinite) cash flow in terms of r and/or x: Period 0 1 2 3 4 n Cash flow 2 3 4 5 n+1
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