Q407
Bond risk premium is added in to bond yield to calculate the
A.
cost of American option
B.
cost of European option
C.
cost of common stock
AnswerD.
cost of preferred stock
Answer: Option C
Solution
Answer: Option C
Solution:
Bond risk premium is added in to bond yield to calculate the cost of common stock. The cost of common stock is common stockholders' required rate of return. Companies can raise new common equity in two ways: by a new common stock issue or by retaining and reinvesting previous earnings.