1. What can be used to estimate the firm’s cost of debt?

A) The interest on bank loans and the YTM on the firm's bonds

B) The interest on bank loans plus a risk premium of 300 to 500 basis points

C) The YTM + risk premium of 300 to 500 basis points

D) The WACC

2. Which is a characteristic of Preferred Stock?

A) Preferred dividends are tax deductible.

B) Preferred stock must be paid before interest payments on loans.

C) Preferred stock usually does not have voting right.

D) Preferred dividends must be paid prior to coupon payments.