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Unformatted text preview: b. Consider a 2-year bond with a 5% coupon and a present yield to maturity of 8%. If interest rates remain constant, one year from now the price of this bond will be what? 5. The market price of a security is $40. Its expected rate of return is 13%. The risk free rate is 7%, and the market risk premium is 8%. What is beta for this security? If beta doubles (and all other variables remain unchanged) what will be the market price of this security? (Assume the security is expected to pay a constant dividend in perpetuity.)...
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- Fall '08