1. Shoe Inc. would like to issue 5,000 shares of preferred stock. The market value of the preferred stock is $22/share. The cost of issuance is $4/share. Shoe Inc. plans to pay a dividend of $1 per share annually. Calculate the cost of issuing new preferred stock.

a. 5.6% b. 3.8% c. 7% d. 4.6%

2. If a $1,000 bond sells for $1,125, which of the following statements are correct?

I. The market rate of interest is greater than the coupon rate on the bond.

II. The coupon rate on the bond is greater than the market rate of interest.

III. The coupon rate and the market rate are equal.

IV. The bond sells at a premium.

V. The bond sells at a discount.

	a.	I and V.
	b.	I and IV.
	c.	II and IV.
	d.	II and V.