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Bond value and required rate of return

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1. ABC company has an outstanding issue of $1,000- par-value bonds with a 12% coupon interest rate. The issue pays interest annually and has 16 years remaining to its maturity date. Describe the two possible reasons why similar-risk bonds are currently earning a return below the coupon interest rate on the ABC bond.

2. Do you think it is a good idea to have a negative beta asset (e.g. a stock) in your portfolio during a crisis like the Covid-19? Discuss.

3. Discuss the relationship between bond value and required rate of return.

4. Investors should be more concerned about the diversifiable risk rather than non-diversifiable risk in their portfolios. Do you agree with this statement? Explain.

5. Internal rate of return is a better capital budgeting technique than Net Present Value. Do you agree with this statement? Explain.

Reference no: EM132535476

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