TYPED SOLUTION ONLY

Consider a stock which pays dividends continuously at a rate propor- tional to its price. The dividend yield is less than the interest rate, but both are positive and continuously compounded. Rank the following quantities in ascending order (i.e., from lowest to highest): (A) = Current stock price (B) = One-year forward price (C) = Two-year forward price (D) = Two-year prepaid forward price (E) = Expected stock price at the end of two years ri LJ Consider a stock which pays dividends continuously at a rate propor- tional to its price. The dividend yield is less than the interest rate, but both are positive and continuously compounded. Rank the following quantities in ascending order (i.e., from lowest to highest): (A) = Current stock price (B) = One-year forward price (C) = Two-year forward price (D) = Two-year prepaid forward price (E) = Expected stock price at the end of two years ri LJ