1. Which of the following statement is incorrect?

a. Most of the answers are correct.

b. Preferred stock is a hybrid security because it has both debt and equity characteristics.

c. Debentures are backed only by the company’s ability and willingness to pay.

d. With a debenture bond, the creditors have a specific claim on the issuing company, a right to the firm’s specific assets.

e. In the event of default, the holder of the second mortgage receives proceeds from the sale of the pledged assets only after the first-mortgage bond investors have received all payments due to them.

2. CBRE Group Inc. issues a 10 percent coupon bond with 20 years maturity, $1,000 face (par) value, and semi-annual payments. If the yield to maturity of this bond is 8 percent, find the bond's price.

a. none of the answers is correct

b. $958.34

c. $1,197.93

d. $702.78

e. $1,054.17

3. Carnival Corp issues a 9 percent coupon bond with 13 years maturity and $1,000 face (par) value. If the current market price of this bond is $1000, find its yield to maturity.

a. none of the answers is correct

b. 10.07%

c. 6.04%

d. 6.43%

e. 9.00%