1. The probability distribution of a less risky expected return is more peaked than that of a riskier return. What shape would the probability distribution be for (a) completely certain returns and (b) completely uncertain returns?
2. A bank is going to issue $5,000,000 in 10-year per value bonds that pay a 6% annual coupon. The bank must pay 0.5% of the face value floatation costs. What is the bank’s effective cost of borrowing?
5.9%
6.5%
6.3%
6.1%
6.7%