Conceptual Questions Question 1: (3 points) Consider a company issued a callable bond 5 years back and set the coupon rate with the market interest rate of 8%. Explain what would influence the company's decision to call (that is retire) the bond at the current time. If the current market interest rate rises to 10% would the company retire the callable bond? What will the company do if the current market interest rate falls to 6%? Give reasons to your decisions. Question 2 (3 points) Let, up until the beginning of year 2009 firm ABC had been paying all of its earnings as dividends, that is the payout ratio was 100%. Let the required return by the market for ABC stock is 8%. If in January 2009 the company evaluates a project with return on investment (ROE) of 10%, would that effect the decision of their dividend payout ratic for the year 2009? How? What will be the effect of the changes in payout ratio over stock price? Explain. the betont stock with an enectetur