What is the component cost of preferred stock for company

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Reference no: EM132070538

1. What is the component cost of preferred stock for a company that has $20 million in preferred stock ($75 par value) that sells for $70 a share, pays a dividend of $6.50 each year, and has an effective tax rate of 30%?

A) 6.07

B) 6.50

C) 8.67

D) 9.29

2. Which of the following statements regarding a 20-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT?

a. The monthly payments will increase over time.

b. The amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%.

c. Exactly 10% of the first monthly payment represents interest.

d. The total dollar amount of interest being paid off each month gets larger as the loan approaches maturity.

e. A larger proportion of the first monthly payment will be interest, and a smaller proportion will be principal, than for the last monthly payment.

Reference no: EM132070538

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