1. It has been empirically observed that CoCo bonds with identical maturity have a higher yield than straight debenture bonds of the same company. Why is this so?
2. Assume that a company’s beginning-of-period price is $15 per common share, its dividends are $1 per share, and its expected cost of equity capital is 10%. What is the expected end-of-period price per common share?
Round to two decimal places.