The current spot rate curve is shown below. Assume annual compounding of rates. Based on

this curve, the $1-$year forward rate $2-$years from now is$?$

forward rate $2\mathrm{.}5\%$

$2\mathrm{.}5\%$ forward rate $3\mathrm{.}5\%$

$3\mathrm{.}5\%$ forward rate $4\mathrm{.}5\%$

$4\mathrm{.}5\%$ forward rate

Question $18$

A preferred stock will pay a dividend of $$2\mathrm{.}75$ in the upcoming year and every year

thereafter; i$.$e$.,$ dividends are not expected to grow. You require a return of $10\%$ on this

stock. Use the constant growth DDM to calculate the intrinsic value of this preferred stock.

price $30$

$30$ price $35$

$35$ price $40$

$40$ price