Answer to Question #294488 in Economics for john k

Question

A.

Using a practical example, explain what is meant by an Effective Annual Interest

Rate?

B.

Z Ltd bond has a 10 percent coupon rate and a K1,000 face value. Interest is paid

semiannually, and the bond has 20 years to maturity. If investors require a 12

percent yield, what is the value of the bond? Also, determine the effective annual

yield on this bond?

C.

Nkandu has a K10,000 to invest in a stock portfolio on LuSE. He intends to invest

in Stock X with an expected return of 14 percent and Stock Y with an expected

return of 10.5 percent. If his goal is to create a portfolio that will generate a return

of 12.4 percent, how much money should he invest in Stock X and Stock Y?

Answer 1

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