Suppose a two-year bond with annual 10 coupon rate is


1. The average return for the S&P 500 index from 1886 to 2017 was 9.5%, with a standard deviation of 18%. Based on these numbers, what is you best forecast for the S&P 500 return for 2018? construct a 95% confidence interval for the forecast.

2. Suppose a two-year bond with annual 10% coupon rate is trading at par. The bonds face value is $1,000. What is the Macaulays duration? Please show formula.

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Financial Management: Suppose a two-year bond with annual 10 coupon rate is
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