Question 1) Bank A offers to lend me the required funds on a loan in which interest must be paid monthly, and the quoted rate is 8 percent. Bank B will charged 9 percent, with interest due at the end of the year. What is the difference in the effective annual rates charged by the two banks?
Question 2) A corporation is growing at a constant rate of 6 percent per year. It has both common stock and non-participating preferred stock outstanding. The cost of preferred stock is 8 percent. The par value of the preferred stock is $120, and the stock has a stated dividend of 10 percent of par. What is the market value of the preferred stock?