8.The returns on the stock of the ABC Corporation have a beta of 1.7. The risk-free rate is 3% and themarket risk premiumis 4%. Assume that the CAPM holds.

(FYI - Express percentage returns as a decimal.)

What is the cost of equity for ABC Corporation?

9. You bought a 20-year, zero coupon bond with a face value of $1,000 and a yield to maturity of 2.5% (Expressed as anEAR, youdon'tneed to deal with the simple rate issue.)

Part A

What is the price of the bond today?

Part B

5 years after your initial purchase, you decide to sell the bond. (15 years are now remaining to maturity.) Interest rates have sincerisento 6.5% on 15-year bonds.

What is your personalannual rateof return on holding the bond?

(FYI - Express your percentages as a decimal.)