1. You forecast that Mega company will pay dividends of $5 at the end of the 1st year. The dividend will double the second year and continue to grow at an annual rate of 5%. What is the current price of Mega stock when the required (expected) return is 15%
2. Assume that the spot rate on a two year security is 5.5%, while the spot rate on a one year security is 7.25%. Assuming that interest is compounded, use information to find the forward rate on a security with a maturity of one year one year from now.
A.5.5%
B.3.78%
C.4.85%
D.5.00%
E.None of the above