1. Washing Corporation's bonds have a 15-year maturity, a 5.00% semiannual coupon, and a par value of $1,000. The going interest rate (rd) is 4.00%, based on semiannual compounding. What is the bonds price?

a.1,160.25

b.1,026.60

c.1,032.05

d.1,146.27

e.1,111.98

------

2. Kimona Company hired you as a consultant to help estimate its cost of common equity. You have obtained the following data: D0 = $0.85; P0 = $20.00; and g = 5.00% (constant). The CEO thinks, however, that the stock price is temporarily depressed, and that it will soon rise to $40.00. Based on the DCF approach, by how much would the cost of common equity from retained earnings change if the stock price changes as the CEO expects?

a. -2.43%

b. -2.23%

c. -1.73%

d. -2.68%

e. -1.23%