1. the present value of an infinite stream of dollar payments of $z (that starts next year) is $z/i when the nominal interest rate, i, is constant. this formula gives the price of a consol -a bond paying a fixed nominal payment each year, forever. it is also a good approximation for the present discounted value of a stream of constant payments over long but not infinite periods, as long as i is constant 1.1. suppose i-1096. let $z-100, what is the present value of the consol? 12. ifi-10%, what is the expected present discounted value of a bond that pays $z over the next 10 years? 20 years? 30 years? (hint: use the formula from chapter 14, but remember to adjust for the first payment. 1.3. repeat the calculations in (1.1) and (1.2) for i-2% and 1-5%.

Profits from using currency options and futures.on july 2, the two-month futures rate of the mexican peso contained a 2 percent discount (unannualized). there was a call option on pesos with an exercise price that was equal to the spot rate. there was also a put option on pesos with an exercise price equal to the spot rate. the premium on each of these options was 3 percent of the spot rate at that time. on september 2, the option expired. go to the oanda.com website (or any site that has foreign exchange rate quotations) and determine the direct quote of the mexican peso. you exercised the option on this date if it was feasible to do so. a. what was your net profit per unit if you had purchased the call option? b. what was your net profit per unit if you had purchased the put option? c. what was your net profit per unit if you had purchased a futures contract on july 2 that had a settlement date of september 2? d. what was your net profit per unit if you sold a futures contract on july 2 that had a settlement date of september 2