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[DOC File]Exam-type questions
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The market risk premium is the difference between the expected return on the market and the risk-free rate. g. CAPM is a model based upon the proposition that any stock’s required rate of return is equal to the risk free rate of return plus a risk premium reflecting only the risk re-maining after diversification. h.
reinvestment risk is greatest for

Reinvestment Risk Defined
Reinvestment rate risk is the risk that once the bond matures, you won’t be able to reinvest the principal at the same rate. The shorter the maturity, the greater the reinvestment rate risk. Statement a is false. Long-term bonds have more interest rate risk and less reinvestment rate risk than short-term bonds. Statement b is false.
price risk vs reinvestment risk

[DOC File]Risk and Return - Leeds School of Business
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a. All else equal, long-term bonds have more interest rate risk than short-term bonds. b. All else equal, high-coupon bonds have more reinvestment rate risk than low-coupon bonds. c. All else equal, short-term bonds have more reinvestment rate risk than do long-term bonds. d. …
reinvestment risk in bonds

[DOC File]Risk and Return - Leeds School of Business
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The market risk premium is the difference between the expected return on the market and the risk-free rate. g. CAPM is a model based upon the proposition that any stock’s required rate of return is equal to the risk free rate of return plus a risk premium reflecting only the risk re-maining after diversification. h.
what is reinvestment risk

[DOC File]Chapter 7
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Risk and Return: The Basics. ... t-bills are exposed to reinvestment rate risk. So, we conclude that there are no truly risk free securities in the United States. If the treasury sold inflation-indexed, tax-exempt bonds, they would be truly riskless, but all actual securities are exposed to some type of risk. ...
reinvestment yield

[DOC File]Risk and Return
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Interest rate risk relates to the value of the bonds in a portfolio, while reinvestment rate risk relates to the income the portfolio produces. No fixed-rate bond can be considered totally riskless. Bond portfolio managers try to balance these two risks, but some risk always exists in any bond.
reinvestment income

[DOC File]Bonds, Instructor's Manual
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Thus, since these cash flows are expected to save the firm 10%, this is their opportunity cost reinvestment rate. The IRR method assumes reinvestment at the internal rate of return itself, which is an incorrect assumption, given a constant expected future cost of capital, and ready access to capital markets. 11-17 a.
6% interest rates on investments

[DOC File]CHAPTER 7
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Reinvestment rate risk is lower, other things held constant, on long-term than on short-term bonds. c. The expectations theory of the term structure of interest rates states that borrowers generally prefer to borrow on a long-term basis while savers generally prefer to lend on a short-term basis, and that as a result, the yield curve is ...
reinvestment rate formula

Reinvestment rate risk