1. Coleman Company issues both common and preferred stock. Assume that the preferred stock pays an annual dividend of $1.32. Using this information, which of the following is true?
a. If the market value of preferred stock is $40, the required rate of return is 4.4%.
b. If the market value of preferred stock is $30, the required rate of return is 3.6%.
c. If the market value of preferred stock is $20, the required rate of return is 8.6%.
d. none of the above are true.
2. A $1000 par-value bond issued by Amberline Corporation is currently selling for $1,200. If the bond will mature in ten years and has a 10% coupon rate, determine the approximate yield to maturity. You should round your answer to two decimal places.
a. 6.14%
b. 8.58%
c. 14.38%
d. 7.27%
e. 10.12%