Question
You have an investment which your financial advisor informs you may have the possible results shown in the table. Return Probability 16.0% 50% 7.5% 35%
You have an investment which your financial advisor informs you may have the possible results shown in the table.
Return | Probability |
16.0% | 50% |
7.5% | 35% |
10.0% | 15% |
What is the standard deviation of the returns of the investment? [9 marks]
(c) A firm issued a 15-year $1,000 par value bond with a coupon rate of 11%. The bond makes semiannual coupon payments. What is the current price of the bond if the it matures in 6 years and investors in similar bonds require a return (yield to maturity) of 10%? [6 marks]
(d) You purchased an item at a price of $8,000 one year ago. You were able rent the item for a while for $1,500 and later sold it for $$6,000, what is your rate of return?
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