1. What are the three basic sources of risk for market participants holding Eurodollars? Explain Explain
2. You consider buying a share of stock at a price of $32. The stock is expected to pay a dividend of $1.48 next year, and your advisory service tells you that you can expect to sell the stock in 1 year for $35. The stock's beta is 0.7, rf is 5%, and E[rm] = 15%. What is the stock's abnormal return?
3. You buy a bond with a $1,000 par value today for a price of $830. The bond has 7 years to maturity and makes annual coupon payments of $66 per year. You hold the bond to maturity, but you do not reinvest any of your coupons. What was your effective EAR over the holding period?