1. A company has 5.5% coupon bonds outstanding with 7 years left to maturity that trade at $1074.34. The bonds are callable two years from today at a 5% call premium. Calculate the yield to maturity and yield to call on the bonds. Which return is an investor most likely to realize? (2) 2. The YTC is a more reasonable investor expectation for the probable realized yield on the bond, because the prevailing market interest rate of 4% on the bonds is well below the 5.5% coupon rate on the outstanding bonds. Therefore, the company will likely exercise its right to call the bonds, and re-finance with lower cost debt. (2) 3. How much would you pay for a 5yr zero coupon bond if your required rate of return is 6% ? (1) 4. What is the yield to maturity on a 5yr zero trading at $650 ? (1) 5. Consider a bond with semi-annual coupon payments, 12 years to maturity, a 4.5% coupon rate, with a current market price of $892 per bond. What is Effective Annual Yield of this bond? (2) 6. You invested $1,000 in a stock with an expected return of 10 percent and $4,000 in a stock with an expected return of 16 percent. What is the expected return of the cembined portfolio of two stocks? (1) 7. What preferred stock dividend should be set by a company wanting to issue $25 par value preferred stock at a price near par value if investment bankers tell management that investors will require an 8% return? (0.5) 1. A company has 5.5% coupon bonds outstanding with 7 years left to maturity that trade at $1074.34. The bonds are callable two years from today at a 5% call premium. Calculate the yield to maturity and yield to call on the bonds. Which return is an investor most likely to realize? (2)