1. Uncle Bob passed away but in his will he had promised to leave you an annuity that will pay $1000 next year and the annuity will grow at an annual rate of 4%. The payments are expected to go on indefinitely and the interest rate is 12%. What is the value of the growing perpetuity?
2. You note the following yield curve in The Wall Street Journal. According to the unbiased expectations hypothesis, what is the one-year forward rate for the period beginning one year from today, 2f1? Maturity Yield One day 3.00 % One year 5.00 Two years 6.25 Three years 8.00.