1. ABC Inc. issued twelve-year 6 percent semi-annual coupon bonds at par. Today

1. ABC Inc. issued twelve-year 6 percent semi-annual coupon bonds at par. Today the bonds are priced at $1112. What is the firms after-tax cost of debt if the tax rate is 30%? 2. If you receive $1067 at the end of each year for the first three years and $5304 at the end of each year for the next three years. What is the net present value of this cash flow stream? Assume interest rate is 9.2%. 3. The nominal rate is 16% compounded monthly. Compute the effective rate. 4. The risk-free rate is 6.2% the market risk premium is 8.7% and the stocks beta is 1.31. What is the cost of common stock (Ke)? 5. You have a portfolio of two risky stocks which turns out to have no diversification benefit. The reason you have no diversification is the returns:Answermove perfectly opposite of one another.are too small.are completely unrelated to one another.move perfectly with one another.are too large to offset.

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