The Florida Investment Fund buys bonds of the Gator Corporation through a broker. The bonds pay 10 percent annual interest. The yield to maturity (market rate of interest) is 12 percent. The bonds have a 10-year maturity.
a. By how much did the company's retained earnings increase?
b. With 100 million shares outstanding and a stock price of $101, what was the dividend yield? (Hint: First compute dividends per share.)
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