Percentage change in the value of DEF bonds

Assignment Help Financial Management

Reference no: EM131999433

1. DEF bonds mature in 7 years and have a duration of 6.5 years. These bonds are priced to yield 10%. If interest rates decrease by 50 basis points, what will be the percentage change in the value of DEF bonds?

A) .0295

B) -.0295

C) .0325

D) -.0325

E) none of the above

2. You are considering investing in one of two? well-diversified portfolios. Portfolio A has an expected return of? 8% and a beta of 1.35 while Portfolio B has an expected return of? 6% and a beta of 0.80. Assuming that you are a rational? risk-averse investor and the? risk-free rate is? 2%, which of the two portfolios should you choose and? why?

A. Portfolio A because it has a higher risk premium.

B. Portfolio B because it has a higher? reward-to-risk ratio.

C. Portfolio B because it has less market risk.

D. Portfolio A because it offers a greater reward per unit of risk.

Reference no: EM131999433

Questions Cloud

Calculate the current value of tango stock : Based on market risk conditions and Tango’s beta value, the required rate of return on Patriot’s stock is 12%. Calculate the current value of Tango‘s stock.

Calculate the current value of foxtrot stock : Calculate the current value of Foxtrot’s stock.

Formulate for YTM-Duration and Volatility of bond : What are the formulate for YTM, Duration, and Volatility of a bond.

Analyse the treatment of inflationary risks by organization : What investment philosophy would one follow if markets are efficient? Analyse the treatment of inflationary risks by the Organization.

Percentage change in the value of DEF bonds : If interest rates decrease by 50 basis points, what will be the percentage change in the value of DEF bonds?

Calculate project npv using discount rate of nine percent : Carson Trucking is considering whether to expand its regional service center in? Mohab, UT. Calculate the? project's NPV using a discount rate of 9 percent.

Investor in active high-risk fund : Would investors in a passive low risk fund have the same concerns about performance indicators than an investor in an active high-risk fund?

Discuss sources of short-term financing : Let's discuss sources of short-term financing. discuss scenarios when companies might encounter short-term business disruptions.

Calculate the monthly returns for walt disney : Calculate the monthly returns for Walt Disney Co (DIS) and the market index.

User Account

All Pages