J&M motor company has a bond with a coupon rate of 8 percent, face value of $1000, 7 years to maturity, semiannual interest payments, and a YTM of 7 percent (compounded semiannually).

a. What is the bond price? (3 marks)

b. What is the current yield on bond? (2 marks)

c. If the company wants to issue 5.4 percent preferred stock with a stated liquidating value of $100 a share. The company has determined that stocks with similar characteristics provide a return of 8.2 percent. What should the offer price be? (hint: the 5.4 percent determines the dividend paid on the liquidating value.) (3 marks)