Relationship in bond price and yield to maturity is convex

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1. The relationship between bond price and yield to maturity is convex. Therefore...

A. since the bond pricing function is negatively sloped, when the yield increases the price decreases at a declining rate.

B. since the bond pricing function is positively sloped, when the yield increases the price decreases at a declining rate.

C. since the bond pricing function is negatively sloped, when the yield declines the price decreases at a declining rate.

D. since the bond pricing function is negatively sloped, when the yield increases the price decreases at an increasing rate.

2. RKKL is considering buying a company that has no leverage but an asset beta of.7. The market risk premium is 6% and the risk-free rate is 2%. If they plan to use 75% debt, what will the required rate of return be?

A. 18.8%

B. 6.2%

C. 8.0%

D. 14.6%

Reference no: EM132037425

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