1. A 7-year, 11.00% semiannual coupon bond with a par value of $1000 may be called in 5 years at a call price of $1,255.00. The bond sells for $1,020.50. (Assume that the bond has just been issued.). What is it’s yield to maturity?
A. 12.59%
B. 12.91%
C. 11.21%
D. 9.94%
E. 10.58%
2. You were hired as a consultant to XYZ Company, whose target capital structure is 31% debt, 12% preferred, and 57% common equity. The interest rate on new debt is 7.80%, the yield on the preferred is 5.35%, the cost of common from retained earnings is 13.00%, and the tax rate is 33.00%. The firm will not be issuing any new common stock. What is XYZ's WACC?
A. 11.80%
B. 7.25%
C. 9.67%
D. 7.93%
E. 7.83%