3. You have a 25 year semiannual bond that pays a 6 % coupon, you are happy with a 4 % yield. What will you pay for the bond? Is it a premium or a discount bond?

3A. A preferred stock pays a $3.20 dividend and investors want a 12 % return. If the growth rate on the companies common stock is 1 %, what are you willing to pay for the preferred stock?