What is expected rate of return of this asset

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Reference no: EM131551272

1. Which of the following statements is most correct?

All else equal, long-term bonds have more interest rate risk than do short-term bonds.

All else equal, high-coupon bonds have more reinvestment rate risk than do low-coupon bonds.

All else equal, short-term bonds have more reinvestment rate risk than do long-term bonds.

All of the answers are correct.

2. An asset has a 15% chance of a -10% return, a 25% chance of a 0% return, a 25% chance of a 5% returns, and a 35% chance of a 20% return. What is the expected rate of return of this asset?

3.75%

4.25%

5.30%

6.75%

7.95%

Reference no: EM131551272

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