Q2. You are given the information of the flowing three Treasury securities. The price quoted are based on a par value of $1,000, and in case of a coupon bond, the coupon is paid semi-annually. All rates are quoted on an annual basis. Annualised coupon rate (%) Yield to maturity (%) Maturity (months) 6 0.00 7.00 12 8.00 8.00 18 12.00 9.00 a) What are the prices of the 6-, 12- and 18-month bonds? [5 marks] b) Use the information given, calculate the annualised 6-, 12- and 18-month spot rate. [10 marks] [Total 15 marks] Q3. Cloud Innovation currently (t-0) pays a dividend of $2 per share. The forecasted growth rate for the next year (t-1) is 25%, but is expected to decline annually by 6% for the two years (t-2 and t-3) that follow until year 4, when the growth rate will stabilise and become sustainable forever. The company has adopted a consistent dividend policy by paying out 60% of earnings as dividend. Assume that the company's return on equity (ROE) and the required return on its shares are 15% and 8%, respectively. a) Calculate the sustainable growth rate of Cloud from year 4. [3 marks] b) What is the market value of on Cloud's share? [12 marks] [Total 15 marks]