Question
Assume 1 = 1.5%, and also assume that the one-period spot rate next period can take the following two values with equal probability: 1 =
Assume 1 = 1.5%, and also assume that the one-period spot rate next period can take the following two values with equal probability: 1 = 2.02% and 1 = 1.11%. Assume that the market price of risk =0.5. Use CAPM for bonds to calculate the current price of a two-period bond (M=100). Also, calculate the Sharpe ratio of the bond investment: 2 = ((2 )1) / ( (2 ) ).
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HBR Guide To Finance Basics For Managers
Authors: Harvard Business Review
1st Edition
1422187306, 978-1422187302
