Question

15. Marvin’s Interiors issued 9-year bonds 2 years ago. The bonds have a face value of $1,400, a 9.0 percent, semiannual coupon, and a current market price of $1,189. What is the pre-tax cost of debt? 13.97 percent 13.02 percent 12.27 percent 13.53 percent

16.

Jack's Construction Co. has 100,000 bonds outstanding that are selling at par value. The bonds yield 8.6 percent. The company also has 3.1 million shares of common stock outstanding. The stock has a beta of 1.2 and sells for $25 a share. The U.S. Treasury bill is yielding 5 percent and the market risk premium is 8 percent. Jack's tax rate is 35 percent. What is Jack's weighted average cost of capital?

3.23 percent

9.52 percent

4.76 percent

6.37 percent

11.45 percent

17.

What are the arithmetic and geometric average returns for a stock with annual returns of 22 percent, 9 percent, –7 percent, and 13 percent? List the arithmetic answer first.

           

9.25 percent; 12.61 percent

12.61 percent; 9.25 percent

9.25 percent; 8.73 percent

8.73 percent; 9.25 percent

12.61 percent; 8.73 percent

Answer 1