1. Calculate a table of interest rates for 5 years based on the following information:
o The pure interest rate is 2%
o Inflation expectations for year 1 = 3%, year 2 =4%, years 3-5 =5%
o The default risk is .1% for year one and increases by .1% over each year
o Liquidity premium is 0 for year 1 and increases by .2% each year
o Maturity risk premium is 0 for years 1 and 2 and .3% for years 3-5
2. Calculate the sustainable growth based on the following information:
- Earnings after taxes = $35,000
- Equity = $100,000
- d=22.4%