Question

please answer all 3!!

QUESTION 25 Rutures contracts are traded on organized exchanges while forward contracts are not True false QUESTION 26 Assume that you can invest an equal dollar amount in four different securities. Holding allelse equal, the benefits of diversification are greatest if the returns for your four securities have higher rather than lower, correlation coefficients True False QUESTION 27 Gilead Sciences has 15 year bond with par value of 1.000 and a coupon coupon payments are manual. The current price is 1973.55. What is the yield-to-maturity of this bond? Be sure to report this as araw umber don't write it as a decimal and don't incude a symbol 5 should be entered os.) and on an annualued basis

Answer 1

25) True
Future contracts are standardize and are traded on exchange while forward contract are not traded on exchange

26) False
Benefit of diversification are greatest when co relation between the stock's return are less

27) Here face value = $1000
Current price = $ 973.55
Coupon rate = 5.6%/2 = 2.8%
Thus interest = 1000 x 2.8% = 28$
n = no. of coupon payment = 15 x 2 =30

YTM = Interest +(Face value - current price/n) / ( Face value + Current price/2)
= 28 + (1000-973.55 / 30) / (1000+973.55)/2
= 28 + (26.45/30) / (1973.55/2)
= 28 + 0.8817 / 986.78
= 28.8817/986.78
= 0.029269
i.e. 2.9269%
Thus annual YTM = 2.9269 x 2 = 5.8537%
Thus Ans : 5.85