When computing npv for risky bond

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Reference no: EM131955407

1. When computing NPV for risky bond, would a risk-averse use discount rate higher/equal to/lower than the one for risk-free bonds? Explain why.

2. What does the law of one price imply for the NPV of a financial asset traded in a competitive market? Explain concepts clearly.

3. Explain clearly why it is possible that, for the same firm, for the same time period:

(a) Sales may rise but net income fall.

(b) Net Income may rise but cash flow fall.

(c ) Net income may rise but stock price fall.

(d) Dividends rise but stock return fall.

Reference no: EM131955407

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