1. Quality Home Made Ice Cream has plans to pay decreasing annual dividends of $1.60, $1.50, and $1.35 over the next three years, respectively. After that, the firm will increase the dividend by 5 percent each year. What is the value of this stock today at a discount rate of 11 percent?
2. A one-year STRIPS sells at an interest rate of 3.15 percent and a two-year STRIPS sells at an interest rate of 3.88 percent. What is the implied one year forward rate? Assume the rates are effective annual rates.
3. A one-year STRIPS sells at an interest rate of 3.20 percent and a two-year STRIPS sells at an interest rate of 3.90 percent. What is the implied one year forward rate? Assume the rates are effective annual rates.