Question 10

Discuss if the following statement is true or false:

Since investing in junk bonds is very risky due to the low credit/bond rating associated with the bonds,

no investor would want to invest in junk bonds.

Question 11

Today is the first day of the year. Randy is planning to take a two-year break from work and travel

round the world. She hopes to be able do this at the end of four years from today. To prepare for this,

she decided to deposit $10,000 at the beginning of each month (with the first deposit starting now), for

the next four years. How much money will Randy have at the end of four years if she can earn an interest

rate of 9.6 percent per year, compounded monthly on her savings?

Question 12

E-Coms has a new issue of preferred stock. The stock will pay a preferred dividend of $5 every year

but the first dividend will not be paid until 5 years from today. If you require a return of 8 percent on

this stock, how much will you pay for the stock now?