1) Carby Hardware has an outstanding issue of perpetual preferred stock with an annual dividend of $4.30 per share. If the required return on this preferred stock is 6.5%, at what price should the preferred stock sell? Select the correct answer.

a. $64.75 b. $66.15 c. $63.35 d. $65.45 e. $64.05

2)

One year ago Lerner and Luckmann Co. issued 15-year, noncallable, 8.7% annual coupon bonds at their par value of $1,000. Today, the market interest rate on these bonds is 5.5%. What is the current price of the bonds, given that they now have 14 years to maturity?

Select the correct answer.

a. $1,304.27

b. $1,314.67

c. $1,309.47

d. $1,306.87

e. $1,312.07