Bacon Signs Company preferred stock pays a perpetual annual dividend of 4.5 of its 100 par
value. If investors' required rate of return on this stock is 12, what is the value per share?
A) 8.50 B) 37.50 C) 45.00 D) 31.82
Question 2
An inflation-indexed Treasury bond with a 5 coupon rate is issued at 1,000. If inflation in the year after issuance is 6,
A)
the new coupon rate will be 11.
B)
the new redemption value is 1,060.
C)
the new redemption value is 1,100.
D)
the bond is redeemed and a new bond with a 6 coupon is issued.