Question 1 Discuss why cost-of-equity, ke, is generally expected to be greater t

Question 1
Discuss why cost-of-equity, ke, is generally expected to be greater than the cost-of-debt, kd, and why
ke and kd vary among securities.
Question 2
Describe the relationship between yield and price.
Question 3
Price a bond that has a face value of $100.00, pays an annual coupon of 8.00%, yields 8.00% p.a. and
matures in
a. 5 years
b. 10 years
c. 5 years and 10 years, but with a 9.00% p.a. yield
d. Given your earlier answers, which bond (the 5-year or 10-year) is more sensitive to changes in
yield?