1. Consider a bond with a coupon rate of 10% and coupons paid annually. The par value is $1,000 and 5 years to maturity. The yield to maturity is 11%. What is the value of the bond?

2. What price would you pay today for a zero-coupon bond that matures in 30 years if your required rate of return is 9%? The face value of the bond is $1,000

3. Calculate the cost of preferred stock if a company pays an annual dividend of $8,with a floatation cost of $5 and a stock price of $125. 4. Risk free rate = 5%

Market return + 14%

What returns should be required from investments whose beta values is 1: