Preferred Stock and WAC C The Saunders Investment Bank has the following financing o...

Debt:

60,000 bonds with a coupon rate of 6 percent and a current price quote of 109.5; the bonds have 20 years to maturity. 230,000 zero coupon bonds with a price quote of 17.5 and 30 years until maturity.

Preferred stock:

150,000 shares of 4 percent preferred stock with a current price of $79, and a par value of $100.

Common stock: 2

2,600,000 shares of common stock; the current price is $65 and the beta of the stock is 1.15.

Market:

The corporate tax rate is 40 percent, the market risk premium is 7 percent, and the risk-free rate is 4 percent.