1. Suppose a firm has a preferred stock that pays a $12 annual dividend (no growth expected in this payment) and currently sells for $100.00 per share. If it plans to issue more preferred shares paying the same dividend but also needs to incur a floatation cost of five percent, the firm's cost of preferred stock would be:
11.70%
12.19%
12.63%
13.03%
13.40%
2. Acme Inc.'s stock has a 30% chance of producing a 10% return, a 40% chance of producing a 14% return, and a 30% chance of producing a 8% return. What is the standard deviation (not the variance!) of the returns to Acme’s stock?
2.53%
2.57%
2.45%
2.32%
2.68%