1. Suppose the 180-day bill rate is higher than the 90-day rate. What does that imply about traders’ expectations of future interest rates? Explain.
2. If there is a beta of 1.2, the risk free rate is 10% and the market risk premium of 5%, what will be the firms cost of equity using the Capital Asset Pricing Model (CAPM) approach?
3. The current price of the firms 10 percent, $100 par value, quarterly dividend, perpetual preferred stock is $115.00.