1. A bond’s current par value is $1,000, annual coupon is $65, 15 years until maturity, and current yield is 8.2%. What is the (approximate) percent price change for 2% change in yield?

2. Jennings Merchandising is trying to determine the cost of common equity financing. The market return is 9% and the risk free rate is 3%. The company has a beta of 0.5. The cost of common equity financing is

a. Between 5% and 7%

b. Between 11% and 12%

c. Between 7% and 8%

d. Between 4% and 5%

3. The spot rate for the Japanese yen currently is ¥123 per $1. The one-year forward rate is ¥122 per $1. A risk-free asset in Japan is currently earning 7 percent. If interest rate parity holds, what rate can you earn on a one-year risk-free U.S. security?

7.88 percent

7.95 percent

6.20 percent

6.13 percent

7.81 percent