ASSETS LIABILITIES AND EQUITIES Current Liabilities $ 3,000,000 Bonds Payable (8 % coupon, paid semi-annually 1,000 face value, mature in 10 years) 12,000,000 Preferred Stock (6%, $50 par) 1,500,000 Common Stock ($100 par) 12,000,000 Paidin Capital 4,000,000 ______ Retained Earnings 8,000,000 $40,500,000 $ 40,500,000

1. How many bonds does this company have outstanding? (8 % coupon, $1,000 face value) $12,000,000
2. Based on information from their investment banker, their currently outstanding bonds (8 % coupon, paid semi-annually, 1,000 face value, with a maturity of ten years) are selling at a yield to maturity of 10 %. The price of each outstanding bond is (choose the closest answer):
3. How many shares of preferred stock are outstanding? (Preferred Stock: 6%, $50 par, $ 1,500,000)
4. The price per share of the preferred stock should be: (the required return of their preferred stock is 5%.)
5. According to the security line analysis, the rate of return required by stockholders of this company is: (Their common stock has a beta of .8; the risk-free rate is 4%; the expected return on the market is 14 %.)