For a price of $100, Andrea will sell you a 2 year bond paying annual coupons of 10% pa. The face value of the bond is $100. Other bonds with the same risk, maturity and coupon characteristics trade at a yield of 6% pa.
A three year bond has a face value of $100, a yield of 10% and a fixed coupon rate of 5%, paid semi-annually. What is its price?
| Portfolio Details | ||||||
| Stock | Expected return |
Standard deviation |
Covariance ##(\sigma_{A,B})## | Beta | Dollars invested |
|
| A | 0.2 | 0.4 | 0.12 | 0.5 | 40 | |
| B | 0.3 | 0.8 | 1.5 | 80 | ||
What is the standard deviation (not variance) of the above portfolio? Note that the stocks' covariance is given, not correlation.
Stock A and B's returns have a correlation of 0.3. Which statement is NOT correct?
According to the theory of the Capital Asset Pricing Model (CAPM), total risk can be broken into two components, systematic risk and idiosyncratic risk. Which of the following events would be considered a systematic, undiversifiable event according to the theory of the CAPM?
Here's the Dividend Discount Model, used to price stocks:
### p_0=\frac{d_1}{r-g} ###
All rates are effective annual rates and the cash flows (##d_1##) are received every year. Note that the r and g terms in the above DDM could also be labelled: ###r = r_{\text{total, 0}\rightarrow\text{1yr, eff 1yr}}### ###g = r_{\text{capital, 0}\rightarrow\text{1yr, eff 1yr}}### Which of the following statements is NOT correct?
Question 207 income and capital returns, bond pricing, coupon rate, no explanation
For a bond that pays fixed semi-annual coupons, how is the annual coupon rate defined, and how is the bond's annual income yield from time 0 to 1 defined mathematically?
Let: ##P_0## be the bond price now,
##F_T## be the bond's face value,
##T## be the bond's maturity in years,
##r_\text{total}## be the bond's total yield,
##r_\text{income}## be the bond's income yield,
##r_\text{capital}## be the bond's capital yield, and
##C_t## be the bond's coupon at time t in years. So ##C_{0.5}## is the coupon in 6 months, ##C_1## is the coupon in 1 year, and so on.
A stock just paid its annual dividend of $9. The share price is $60. The required return of the stock is 10% pa as an effective annual rate.
What is the implied growth rate of the dividend per year?
Question 897 comparative advantage in trade, production possibilities curve, no explanation
Adam and Bella are the only people on a remote island. Their production possibility curves are shown in the graph.
Which of the following statements is NOT correct?