1. This morning, Alicia bought a ten-year 8% coupon bond that pays interest annually. She paid $994 for a $1,000 bond. If the market interest rate on this type of bond declines to 6.5% tonight, how much will Alicia receive for her first interest payment?
a. $69.58
b. $40.00
c. $32.31
d. $80.00
e. $70.00
2. Your portfolio consists of two stocks. You have $2500 in stock A and $7500 in stock B. The returns for stock A have a standard deviation of 20% and the returns for stock B have a standard deviation of 10%. The correlation coefficient between A and B is 0.1. What is your portfolio standard deviation?
a. 9.4%
b. 10.5%
c. 6.8%
d. 11.2%
e. 10.2%