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True or False ? 5. Long maturity, low coupon bonds are more sensitive to changes in interest rates than short maturity, high coupon bonds. 6.
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5. Long maturity, low coupon bonds are more sensitive to changes in interest rates than short maturity, high coupon bonds. 6. To determine the value of any asset, one must estimate its future cash flows, then determine the present value of those cash flows by discounting them at an appropriate rate of return. 7. All else equal, the higher the risk, the lower the required return and the less one is willing to pay for an asset. 8. The return on a stock is the sum of its dividend payout ratio and its capital gain. 9. Diversification has the effect of lowering the risk of each stock placed in a portfolio. 5. Long maturity, low coupon bonds are more sensitive to changes in interest rates than short maturity, high coupon bonds. 6. To determine the value of any asset, one must estimate its future cash flows, then determine the present value of those cash flows by discounting them at an appropriate rate of return. 7. All else equal, the higher the risk, the lower the required return and the less one is willing to pay for an asset. 8. The return on a stock is the sum of its dividend payout ratio and its capital gain. 9. Diversification has the effect of lowering the risk of each stock placed in a portfolioStep by Step Solution
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