*Debt: 6,000 of 8 percent coupon bonds outstanding, $1,000 par
value, 10 years to maturity, selling for 108 percent of par; the
bonds make annual payments.
*Preferred stock: 8000 shares of 7.2% preferred stock dividend
rate selling at $90 per share.
*Common stock: 500,000 shares outstanding, selling for $70 per
share; the beta is 1.12.
*Market data: 10 percent market rate of return and 5 percent
risk-free rate, and the corporate tax rate of 30%.
What is the market risk premium in the
economy?
Group of answer choices
a. 5%
b. 10%
c. 15%
d. 0%
*Debt: 6,000 of 8 percent coupon bonds outstanding, $1,000 par value, 10 years to maturity, selling for 108 percent of p
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