New issue of preferred stock

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Reference no: EM132024376

1. The yield curve of the internal I-region shows that the 1-year, 2-year, 1-year, 3-year and 4-year securities are 5%, 6%, 6.5% and 6.75%, respectively. Using PET, calculate:

A) Expected annual rate for one year

B) Expected two-year rate for one year

C) Expected three-year rate for one year

D) Two-year expected rate for two years

2. E-Eyes.com has a new issue of preferred stock it calls 20/20 preferred. The stock will pay a $20 dividend per year, but the first dividend will not be paid until 20 years from today.

If you require a return of 10.25 percent on this stock, how much should you pay today?

Reference no: EM132024376

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