1. Coleman Company issues both common and preferred stock. Assume that the preferred stock pays an annual dividend of $1.32. Using this information, which of the following is true?

a. If the market value of preferred stock is $40, the required rate of return is 4.4%.

b. If the market value of preferred stock is $30, the required rate of return is 3.6%.

c. If the market value of preferred stock is $20, the required rate of return is 8.6%.

d. none of the above are true.

2. A $1000 par-value bond issued by Amberline Corporation is currently selling for $1,200. If the bond will mature in ten years and has a 10% coupon rate, determine the approximate yield to maturity. You should round your answer to two decimal places.

a. 6.14%

b. 8.58%

c. 14.38%

d. 7.27%

e. 10.12%