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    Bond and Preferred Stock

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    49. What is the yield to maturity, to the nearest percent, for the following bond: current price is $908, coupon rate is 11 percent, $1,000 par value, interest paid annually, eight years to maturity?
    (a) 11 percent
    (b) 12 percent
    (c) 13 percent
    (d) 14 percent

    50. What is the current price of a $1,000 par value bond maturing in 12 years with a coupon rate of 14 percent, paid semiannually, that has a YTM of 13 percent?
    (a) $604
    (b) $1,090
    (c) $1,060
    (d) $1,073

    51. A firm has issued cumulative preferred stock with a $100 par value and a 12 percent annual dividend. For the past two years, the board of directors has decided not to pay a dividend. The preferred stockholders must be paid _________ prior to paying the common stockholders.
    (a) $ 0/share
    (b) $12/share
    (c) $24/share
    (d) $36/share

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    Solution Preview

    49. The YTM is the discounting rate that will make the PV of interest and principal equal to price today
    908 = 110 X PVIFA (8, ytm%) + 1,000 X PVIF (8,ytm%)
    This ...

    Solution Summary

    The solution explains the calculation of yield to maturity and price of a bond and the dividend calculations for preferred stock.