1) Fifteen years ago KFC Inc. issued twenty-five-year 10% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have fallen and the yield to maturity on the firm's bonds is now 6%. With this information, what is the price today for such a bond?

a) $1,000

b) $1,294.40

c) $1,091.08

d) $914.41

2) You want to invest in a stock that pays $4.00 annual cash dividends for the next 3 years. At the end of the 3 years, you will sell the stock for $35.00. If you want to earn 9% on this investment, what is a fair price for this stock if you buy it today?

a) $41.37

b) $37.15

c) $24.75

d) $18.91