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1. Of the following bonds, which one has the lowest degree of interest rate risk?
8 years to maturity with a coupon rate of 6%
8 years to maturity with a coupon rate of 4%
12 years to maturity with a coupon rate of 6%
12 years to maturity with a coupon rate of 4%
2. Larvey Co. has an unlevered cost of capital of 10.9 percent, a tax rate of 35 percent, and expected earnings before interest and taxes of $21,800. The company has $25,000 in bonds outstanding that sell at par and have a coupon rate of 6 percent. What is the cost of equity?
11.6 Percent
13.36 Percent
15.64 Percent
14.07 Percent
14.29 Percent
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When you calculate the Present Value of an asset's cash flow,
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