Calculate the expected change in price of these bonds and


1. The following data is available for the following bonds. The modified duration of Bond A = 10 The modified duration of Bond B = 10.5 The interest rate is likely to increase by 50 basis points. Calculate the expected change in price of these bonds and recommend which bond will be more suitable for risk averse investors.

2. Suppose the market portfolio has a volatility of 16%. FM stock has a 26% volatility and a correlation with the market of 0.33. What is FM’s beta with the market?

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Financial Management: Calculate the expected change in price of these bonds and
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