1. A 25-year, $1000 par value bond has an 8.5% annual payment coupon. The bond currently sells for $900. If the yield to maturity remains at its current rate, what will the price be 5 years from now?
2. An investment with a $500 standard deviation and a $5,000 expected value has a higher risk than an investment with a $4,000 standard deviation and a $50,000 expected value.
True
False
3. When considering the overall portfolio of the firm, which of the following is true?
a. The firm needs to consider the impact of a given project on the overall risk of the firm.
b. The firm needs to recognize that a risky investment may create a portfolio with less risk.
c. All of these options are true.
d. The firm needs to consider how the returns of the projects in the portfolio are correlated.