## Answers

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

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