1. As discussed in class, based on the CAPM, an electric utility will have the greater cost of equity capital than an airline company.

True or False.

2. A coupon bond pays annual interest, has a par value of $1,000, matures in 5 (five) years, has a coupon rate of 7.45%, and has a yield to maturity of 8.82%. The current yield on this bond is ________% (round to 2 decimal points.)

3. Today you purchase a coupon bond that pays an annual interest, has a par value of $1,000, matures in six years, has a coupon rate of 10%, and has a yield to maturity of 8%. One year later, you sell the bond after receiving the first interest payment and the bond's yield to maturity had changed to 7%. Your annual total rate of return on holding the bond for that year is

A. 10%

B. 8.00%.

C. 7.00%.

D. 9.95%.

E. 11.95%.