Four years ago, Sam invested in Grath Oil. She bought three of its \( \$ 1,000 \) par value bonds at a market price of 93.938 and with an annual coupon rate of \( 6.5 \% \). She also bought 450 shares of Grath Oil stock at \( \$ 44.11 \), which has paid an annual dividend of \( \$ 3.10 \) for each of the last ten years. Today, Grath Oil bonds have a market rate of 98.866 and Grath Oil stock sells for \( \$ 45.55 \) per share. Use the scenario above to select the best answer. a. It is equally likely that the company would suspend paying interest on the bonds and dividends on the stock. b. Both the coupon rate and the dividend rate are fixed and cannot change. c. The bonds showed a higher percentage return than that of the stocks. d. The amount of money received annually in interest (on the bonds) and in dividends (on the stocks) depends on the current market prices.

Let's analyze each option: a. It is equally likely that the company would suspend paying interest on the bonds and dividends on the stock. - This statement is not necessarily true. The likelihood of a company suspending payments on bonds and dividends on stock depends on the financial health of the company, not on the initial investment or market prices. Therefore, we cannot conclude that this is equally likely based on the information provided. b. Both the coupon rate and the dividend rate are fixed and cannot change. - This statement is true. The coupon rate on bonds is a fixed percentage of the par value and does not change over the life of the bond. Similarly, the dividend rate on stocks is a fixed amount per share and does not change over time unless the company decides to change it. Therefore, this is a correct statement. c. The bonds showed a higher percentage return than that of the stocks. - We do not have enough information to calculate the actual percentage returns for both the bonds and the stocks. We would need to know the current market value of the bonds and the current number of shares of stock to calculate the returns. Therefore, we cannot determine if this statement is true or false based on the information provided. d. The amount of money received annually in interest (on the bonds) and in dividends (on the stocks) depends on the current market prices. - This statement is false. The amount of money received annually in interest on bonds and dividends on stocks is determined by the terms of the bond and stock, respectively, not by the current market prices. The market prices may affect the total return on investment, but they do not determine the fixed annual payments. Based on the analysis, the best answer is: b. Both the coupon rate and the dividend rate are fixed and cannot change.