1. A company releases a five year bond with a face value of $1,000 and coupons paid semiannually. If market interest rates imply a YTM of 5%, what should be the coupon rate offered if the bond is to trade at par? A. 5.0% B. 2.5% C. 7.0% D. 6.0%
2. Modern Manufacturing pays a dividend of $3.10 per share and is expected to pay this amount indefinitely. If the firm’s equity cost of capital is 9%, which of the following would be closest to its stock price? A. $18.00 B. $34.44 C. $36.16 D. $23.33