1. Bey Co. issued 20-year, $1,000 bonds at a coupon rate of 7 percent. The bonds make annual payments. If the YTM on these bonds is 5 percent, what is the current bond price?
2. Seventeenth Bank has an issue of 9% preferred stock with a $100.00 par value that just sold for $119 per share. What is the bank's cost of preferred stock?
(Show your work and round your answer to two decimal places.
3. You own a portfolio that has $1,500 invested in Stock A and $2,600 invested in Stock B. If the expected returns on these stocks are 10 percent and 16 percent, respectively, what is the expected return on the portfolio? (Show your work.)
4. A stock has a beta of 1.05, the expected return on the market is 12 percent, and the risk-free rate is 4 percent. What must the expected return on this stock be? (Show your work.)
5. Given the following information, calculate the weighted average cost for the Han Corp.
Percent of capital structure:
Preferred stock 10%
Common equity 60%
Debt 30%
Additional information:
Corporate tax rate 34%
Dividend, preferred $9.00
Dividend, expected common $3.50
Price, preferred $102.00
Growth rate 6%
Bond yield 10%
Flotation cost, preferred $3.20
Price, common $70.00
6. What are some important factors to consider when conducting a credit evaluation and scoring?
7. Provide three examples of situations in which business ethics play a role in the financial management process. Explain your rationale, and how these situations may affect the value of the firm.
8. What are the factors that make up the capital asset pricing model? Where would you typically find the data for these factors?