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Calculate the cost of capital of preference shares

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Reference no: EM132662217

Q1) A Limited has just issued a bond with face value of $1000 and a coupon rate of 8%. If the bond has a life of 15 years, pays annual coupons and the YTM is 7.5%, what will the bond sell for?

Q2) Given that preference shares have an expected dividend stream of 20 cents in perpetuity and that the current market price (cum-dividend) of the preference shares is $2.40, calculate the cost of capital(kp) of these preference shares.

Reference no: EM132662217

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