1. Spiess Corporation's 12%, $1000 bonds mature in 10 years. The company can call the bonds in five years if it pay bondholders a call premium of 12 percent. What should Spiess's bonds sell for if investors expect them to be called in five years and the interest rate is 9% ?

A. 1195.96 B. 840.45 C. 2120 D. 1194.68

2. Joshua Trucking has chosen a new software package tied to seatellite global positioning system(GPS), in order to mnitor its fleet. The software will be outdated after three years and replaced. The software vendor has given Joshua Trucking the choice of buying the software for 65000 or leasing it for an annual payment $25000. To attract customers, the GPS vendor allows lease payments at year-end. The firm has decided to purchase the vendor's service contract under either option. Assume that dereciation is on a straight-line basis, Joshua Trucking's cost of obtaining funds is nine percent, and the firm is in the 34 percent tax bracket. Should it borrow and buy or lease the GPS software?