n 3. TEXTBOOK CHAPTER 3 - EXERCISE 6 - CASH FLOWS Assume we are at period 0. Letr be the periodic interest rate and let x = 1/(1+r) be the 1 period discount factor. (a) Let Sn be the present value of the following cash flow: 1 3 32 3" 1 1 0 1 2 Derive the present value Sn in terms of x and n. (b) Derive the present value S. of the following (infinte) cash flow in terms of r and/or : 1 2 3 n+1 1 1 1 0 1 2 Suggestion: Calculate the present value S, for a finite stream, and then take the limit as n-00. n