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1. Four years ago, Goodwynn & Wolf Incorporated sold a 30-year bond issue with a 12.50% annual coupon rate and a 7.50% call premium. Today, G&W called the bonds. The bonds originally were sold at their face value of $1,000. Compute the realized rate of return for investors who purchased the bonds when they were issued and who surrender them today in exchange for the call price.
14.02%
14.94%
12.50%
7.50%
2. An issue of preferred stock is paying an annual dividend of $4.50. The growth rate for the firm's common stock is 6%. What is the preferred stock price if the required rate of return is 10%? (Round your answer to 2 decimal places.)
$45.00
$50.00
$42.50
$47.50
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Derive a put-call parity relationship between C1 and C2.
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