Required: Calculate the: Cal Bank has a corporate bond that matures in two years but makes semi-annual interest The par value is GHc 1000, the coupon rate equals 4 percent and the bond's market price is GHc 1019.27. Determine the bonds yield to maturity
Risk and return
Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary.
Capital Asset Pricing Model
Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.
Angela’s portfolio holds security A, which returned 12.0%, security B, which returned
15.0% and security C, which returned -5.0%. At the beginning of the year 45% was invested in security A, 25.0% in security B and the remaining 30% was invested in security C. The correlation between AB is 0.75, between AC 0.35, and between BC -0.5. Securities A's standard deviation is 12%, security B's standard deviations is 15% and security C's is 10%.
Required: Calculate the:
- Cal Bank has a corporate bond that matures in two years but makes semi-annual interest The par value is GHc 1000, the coupon rate equals 4 percent and the
bond's market price is GHc 1019.27. Determine the bonds yield to maturity
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