Question: 1. As discussed in class, based on the CAPM, an electric utility will have the greater cost of equity capital than an airline company. True

1. As discussed in class, based on the CAPM, an electric utility will have the greater cost of equity capital than an airline company.

True or False.

2. A coupon bond pays annual interest, has a par value of $1,000, matures in 5 (five) years, has a coupon rate of 7.45%, and has a yield to maturity of 8.82%. The current yield on this bond is ________% (round to 2 decimal points.)

3. Today you purchase a coupon bond that pays an annual interest, has a par value of $1,000, matures in six years, has a coupon rate of 10%, and has a yield to maturity of 8%. One year later, you sell the bond after receiving the first interest payment and the bond's yield to maturity had changed to 7%. Your annual total rate of return on holding the bond for that year is

A. 10%

B. 8.00%.

C. 7.00%.

D. 9.95%.

E. 11.95%.

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