Here are the three problems I am having most trouble with this week... Problem 1: Assume that AT&T's pension fund managers are considering two alternative securities as investments: (1) Security Z (for zero intermediate cash flows), which costs $422.41 today, pays nothing during its 10-year life, and then pays $1,000 after 10 years or (2) Security B, which has a cost today of $1,000 and which pays $80 at the end of each of the next 9 years and then $1,080 at the end of Year 10 a. Assume that the interest rate AT&T's pension fund managers can earn on the fund's money falls to 6% immediately after the securities are purchased and is expected to remain at that level for the next 10 years. What would the price of each security change to, what would the fund's profit be on each security, and what would be the percentage profit (profit divided by cost) for each security? b. Assuming that the cash flows for each security had to be reinvested at the new 6 percent market interest rate, (1) what would be the value attributable to each security at the end of 10 years and (2) what "actual, after-the-fact" rate of return would the fund have earned on each security? (Hint: The "actual" rate of return is found as the interest rate that causes the PV of the compounded Year 10 amount to equal the original cost of the security.) c. Now assume all the facts as given in parts a and b except assume that the interest rate rose to 12 percent rather than fell to 6 percent. What would happen to the profit figures as developed in part a and to the "actual" rates of return as determined in part b? Explain the results.