Polycorp has $2,000,000 in face value of debentures issued two years ago with a coupon of 10% paid annually. When they were issued they had a maturity of six years. The market price of the debentures is $104.50. What is the market yield on the debentures? What is the total market value of the debentures? Assume that each debenture has a face value of $100.

Polycorp uses 90-day bank bills as a source of funds. Face value of the bills is $1,000,000. The bills have a market value of $980,000 and 90 days to maturity. Calculate the cost of capital for the bills.

Polycorp has also issued some non-redeemable preference shares. These shares pay a dividend of 15% on a par value of $1.00. Their current market price is $1.20. What is the cost of preference capital? The total book value of the preference shares is $600000. What is the total market value of the preference shares.