Question

1.Fundamental analysis is the research to forecast the movements in the prices of securities based on trends and patterns in past prices.

True

False

2. If ATT's 8% coupon bonds maturing in 5 years are selling for 103% of the par value, the yield to maturity of this issue must be higher than 8%.

True

False

3. The coupon rate for a specific issue of bonds, such as ATT's 6% bonds that were issued in 2017, does not vary over time. However, the required rate of return changes as economic factors change.

True

False

4. The standard deviation of the well-diversified market portfolio is around 30%

True

False

Answer 1

ANSWER

1) CORRECT ANSWER FALSE

EXPLANATION : Forecasting of Stock Prices on the basis of past trends and patterns is known as TECHNICAL ANALYSIS. Fundamental Analysis is basically analysis of Stocks's Intrinsic Value, Company's Future Projects, its Management etc .

2) CORRECT ANSWER FALSE

EXPLANATION : Bonds trades at PREMIUM in the Market when Company is paying to bondholders {ie. Coupon} MORE THAN their Expectations {ie. YTM}. This is due to that reason that when this situation happens than people rush in to Invest in such Bonds which creates a Buy Pressure in the market there making such Bond trade at Premium.

3) CORRECT ANSWER TRUE

EXPLANATION : Coupon Rate is a Pre-determined Rate which is set at the time of Issue of Bond. Such Rate does not change over the life of such Bonds. HOWEVER, the Market Interest Rates keeps on changing due to various factors prevailing in the market. Hence due to such change in Market rate of Interest, Required Rate of Return of Bondholders keeps on changing.

4) CORRECT ANSWER FALSE

EXPLANATION : There is no such thing as such. Standard Deviation of Well Diversified Portfolio is genrally as low as possible.