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1. Many think that owning bonds is not risky. List and briefly explain two specific reasons why owning bonds is risky.
2. Explain how an investor's risk aversion is reflected in a bond's maturity risk premium.
3. Would an increase in the volatility of long-term interest rates cause a bond investor to pay more or less for a non-callable bond that had high convexity? Briefly explain your answer.
4. When computing a bond's ex ante yield to maturity two assumptions are made. List and briefly explain these two assumptions (assume the bond is non-callable).
5. Say you purchase a callable bond for $X. Explain how you are simultaneously selling a call option.
6. With words only explain how reinvestment rate risk on a long-term non-callable bond might cause the bond's ex ante YTM to differ from its actual YTM. (This question is focusing on the bond's interest payment cash flows, not reinvestment of principal.)
7. Explain how a long-term bond's price is impacted in opposite directions when the required rate of return on the bond rises.
Calculate the payback period for each project and state what decision MSAF Plc will reach if they use a three-year payback period and calculate the IRRs for projects 1 and 4. What is the appropriate accept/reject decision for these two projects?
you are the cfo of ford motor company the company considering taking on a project that requires 10 million in
here are book- and market-value balance sheets of the united frypan company
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Use the RADR for each project to determine risk- adjusted NPV and compare and discuss your findings in parts a andc. Which project do you recommend that the firm accept?
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How much could you withdraw today and at the beginning of each of the next 3 years and end up with zero in the account?
you are required to prepare the final accounts of a trader from the following informationassets and liabilities1.1.2008
Computation of return on stock using CAPM approach - Other things held constant, if the expected inflation rate decreases and investors also become more risk averse, the Security Market Line would shift
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