407M02Sol_add - is probably quite low although the YTM will...

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MIT Sloan School of Management J. Wang 15.407 E52-456 Fall 2003 Midterm 2002 Answers to 1(d) and 1(f) 1(d): Uncertain: In terms of riskless bonds, higher yield to maturity means higher average returns. However for risky bonds that does not need to be true, although that will generally hold. For example, if a company is almost certain to default on its payment, you actual return
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Unformatted text preview: is probably quite low although the YTM will be really high. 1(e) False: The market price of a share of stock equals the discounted value of the stream of future dividends per share, using the appropriate discount rate. 1(f) False: If the net convenience yield is higher than the riskless interest rate, the future price will exhibit backwardation. 1...
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This note was uploaded on 01/19/2011 for the course 15 15.407 taught by Professor Wang during the Fall '03 term at MIT.

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