Suppose the interest rate is r = 3% per year forever.

(a) What should be, at time t = 0, the price of a security that pays 100 each year

t {1,2,3,4,5}?

(b) What should be, at time t = 0, the price of a security that pays 100 in all year

t 6?

(c) What should be, at time t = 0, the price of a perpetuity that pays 100 every

year?

(d) Explain the relationship between the security prices you calculated in questions (a), (b), and (c).