1. Farley Inc. has perpetual preferred stock outstanding that sells for $30 a share and pays dividend of $2.75 at the end of each year. What is the required rate of return?
2. If Treasury bills are currently paying 6 percent and the inflation rate is 2.3 percent, what is the approximate and the exact real rate of interest?
3. Briefly explain the differences between an Annual Percentage Rate (APR) and the Effective Annual Rate (EAR).