Question 7 1 pts Both Woolies and Coles are stable enterprises, and, as such, they issue a fair amount of bonds. Suppose both Woolies and Coles have bonds that have a face value of $100, and each pays $8 in coupons annually. Woolies' bonds will mature in 5 years and Coles' bonds will mature in 6. If the yield to maturity for both of these bonds changes from 8% to 6%, then: both bonds will increase in value but Coles' bonds will increase more both bonds will decrease in value but Woolies' bonds will decrease more both bonds will decrease in value but Coles' bonds will decrease more both bonds will increase in value but Woolies' bonds will increase more An analyst considers three possible future states of the world: A high growth expansion (Boom), a moderate growth expansion (normal), and a mild contraction (Recession). The analyst is not yet ready to estimate returns for Stocks A, B, and C in each state of the economy, but is able to state whether realised returns are higher or lower than expected returns. With this information what can we say about the correlation and covariance of these assets? Scenario Stock A Stock B Stock C Recession 7 A, Recession EL Normal 1 A.Normal = ETA) "B, Normal = E[r TC Normal = EL Boom T'A Boom > Era TB,Boom = ETB] TC,Boom