Explain conceptually how bonds are priced. Moreover, define yield to maturity. Q.2. Diane is interested in buying a fiveyear zero coupon bond with a face value is $1,000.
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Q.1. Explain conceptually how bonds are priced. Moreover, define yield to maturity.
Q.2. Diane is interested in buying a fiveyear zero coupon bond with a face value is $1,000. She understands that the market interest rate for similar investments is 9 percent. Assume annual coupon payments. What is the current value of this bond?
Q.3. What is the general formula used to calculate the price of a share of a stock? Explain with suitable example.
Q.4. What is the difference between the expected rate of return and the required rate of return? What does it mean if they are different for a particular asset at a particular point in time?
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