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1. A share of perpetual preferred stock pays an annual dividend of $12.00 per share. If investors require a 12.50 percent rate of return, what should be the price of the preferred stock ?

2. A 20-year bond pays 6% on a face value of $1,000. Similar bonds are currently yielding 5%. Suppose that an investor receives an offer to purchase the bond for $1,115. Should she purchase the bond?

a. The bond is undervalued; she should not purchase it.

b. The bond is overvalued; she should not purchase it.

c. The bond is undervalued; she should purchase it.

d. The bond is overvalued; she should purchase it.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92750326

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