1. A corporate bond with a face value of $1,000 matures in 4 years and has an 7% coupon paid semi-annually. The current price of the bond is $932. What is the yield to maturity for this bond?

2: You are considering investing in one of the these three stocks:

Stock

Standard Deviation

Beta

A

20%

0.52

B

10%

0.61

C

12%

1.29

1. If you are a strict risk minimizer, you would choose Stock ____ if it is to be held in isolation and Stock ____ if it is to be held as part of a well-diversified portfolio.

Ans1: B; C

Ans 2: A; C

Ans 3: B; A

Ans 4: C; A