1. Suppose a firm has a preferred stock that pays a $12 annual dividend (no growth expected in this payment) and currently sells for $100.00 per share. If it plans to issue more preferred shares paying the same dividend but also needs to incur a floatation cost of five percent, the firm's cost of preferred stock would be:

11.70%

12.19%

12.63%

13.03%

13.40%

2. Acme Inc.'s stock has a 30% chance of producing a 10% return, a 40% chance of producing a 14% return, and a 30% chance of producing a 8% return. What is the standard deviation (not the variance!) of the returns to Acme’s stock?

2.53%

2.57%

2.45%

2.32%

2.68%