(A)investors expect stock A a 40% to grow and 25% for stock B to grow, what is the trading strategy? 1.short A and short B 2.long A and short B 2.short A and long B 4.long A and long B (B) Which bond has lowest interest rate risk? High Coupon and High Prob of Deault…is this correct?? © REIT can trade like closed end fund?? (D) Commingled can trade like closed end fund?? (E) degree of freedom increase, the shape of t-distribution approach? (F) commmon size financial statement, the 100% of asset value is based on the asset of the Firm or Industry?
Please make your questions clearer. I have no clue what you are asking on most of these. Bond with lowest interest rate risk = short maturity, high coupon, high YTM. As DF increase, t-distirbution approachs shape of normal curve (taller, thinner tales) Common sized - total assets is total asset on the firm’s balance sheet.
A long A and long B B zero coupon bond
A zero coupon bond is likely going to have extremely high interest rate risk, not low.
mcf Wrote: ------------------------------------------------------- > A zero coupon bond is likely going to have > extremely high interest rate risk, not low. Oh I was thinking if you hold zero coupon to the maturity. BtW mcf, are you appearing for L1 or LII
Fingers crossed for lvl 1.
which bond has the lowest interest rate risk? A. low coupon low prob. of default B. high coupon low prob of default C. low coupon high prob of default D. high coupon high prob of default C) Can REIT trade like closed end fund?? Yes or no?? (D) Commingled can trade like closed end fund?? Yes or no??
A) long A and short B B) B E) normal…? F) firm
For the bond question, it’s either B or D, given the higher coupon. I’ve not seen anything on the probability of default on interest rate risk, however. My only thought is that high probability of default —> greater credit risk ----> greater credit yield spread to compensate ----> creater YTM, which ultimately means lower interest rate risk. So, I’d say D… but open to other thoughts…
“For the bond question, it’s either B or D, given the higher coupon. I’ve not seen anything on the probability of default on interest rate risk, however. My only thought is that high probability of default —> greater credit risk ----> greater credit yield spread to compensate ----> creater YTM, which ultimately means lower interest rate risk” Thanks…I think “D” is the answer.
why not long A and long B for the first question? What do you gain by shorting B? We are not told about the budget of the investor.
Dreary, I agree with you. I don’t think the full question was posted. Since both stock are going to increase in value, obviously if you have the fund, you go long both position (if you HAD to enter into each position).