Answer:
Correct option is (c)
Explanation:
Face value of bond is $1,000. If investors feel that bond issued by Springfield is less attractive than other bonds, this means either the bond is offering a coupon rate lower than market interest rate prevailing in the market as compared to other bonds.
In this case, bond will be sold at a price lower than its face value. This is also called discount bonds. Price of the bond falls as investors feel they can buy a similar bond that offers better returns.
Out of all options, $875 is lower than face value of $1,000, so, bond would be most likely sold at $875.
Answer:
Beta is 0.85
Explanation:
The value of Beta can de derived from the CAPM formula of expected return
expected return=risk-free rate+Beta*market risk premium
expected return is 10.2%
risk-free rate is 4.10%
market risk premium is 7.2%
Beta is unknown
10.20%=4.10%+Beta*7.20%
10.20%-4.10%=Beta*7.20%
6.10%
==Beta*7.20%
Beta=6.10%
/7.20%
Beta= 0.85
Answer:
the security has below average market risk.
Explanation:
As we know that the beta is the systematic risk i.e. market risk of the stock.
if we assume that the average risk in the market is 1 so the beta of the market or market beta is the average risk
Now if the beta of the stock is less than 1 i.e. 0.5 so it is below the average risk of the market
Hence, the correct option is d.
Answer:
lol umm i knew it but then forgot
Explanation:
