Question:
A bond has a $1000 face value. The coupon rate is 8%, which is paid semi-annually. The bond will mature in 12 years. The required rate of return (that is: the market rate being paid for comparable bonds, which is also the annual interest rate used to discount the cash flows on the bond) is 9%. What is the market value (present value) in dollars of this bond?
You have owned a stock for 3 years. You bought the stock thee years ago at a price of $ 17 (P-3). You just sold it for $23 (P0). The stock paid a dividend of $1 (Div) at the end of each year. What is realized return that you got for this stock?
There are a number of theories presenting the causes of the term structure of rates. Three of them are: The Unbiased Expectations Theory, The Liquidity Preference Theory, The Market Segmentation Theory. Explain each of these theories.