What shape does the yield curve have

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Reference no: EM131932072

1. Jack's Construction Co. has 100,000 bonds outstanding that are selling at par value of $1,000. The bonds yield 8.9 percent. The company also has 3.4 million shares of common stock outstanding. The stock has a beta of 1.5 and sells for $40 a share. The U.S. Treasury bill is yielding 5 percent and the market risk premium is 8 percent. Jack's tax rate is 35 percent. What is Jack's weighted average cost of capital?

A. 6.13%

B. 12.25%

C. 9.80%

D. 7.35%

E. 14.55%

2. For the next three futures expirations, you observe the following Eurodollar quotations:

MAR 95.00

JUN 94.70

SEP 94.35

What shape does the yield curve have? Explain.

Reference no: EM131932072

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