Securities is the riskiest to investors

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Reference no: EM132027023

1. A $1,000 par value bond pays interest annually. The bond's coupon interest rate is 7%, and investor's required expected rate of return for this bond is 4%. If the bond matures in 5 years, what is the estimated value of the bond?

$857 $973 $1,000 $1,080 $1,134

2. Which of the following securities is the riskiest to investors?

Floating rate notes.

Income bonds.

Treasury bills.

First mortgage bonds.

Common stock.

3. Sandpiper Inc. is estimating its weighted average cost of capital (WACC). Sandpiper’s capital structure weights on debt, preferred stock, and equity are 40%, 0%, and 60%, respectively. Its corporate tax rate is 30%. The expected returns required by holders of debt and equity are 6.00% and 10.50%, respectively. Compute Sandpiper’s WACC.

6.55%

7.98%

8.11%

8.25%

9.75%

10.00%

Reference no: EM132027023

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