1. (TCO 1) Given the data below, calculate the expected return, variance, and standard deviation of the following company.
In a recessionary economy, which is expected to occur with a 30% probability, the expected returns would be -5%.
In an expanding economy with an expected probability of occurrence of 20%, the expected return would be 20%.
In a normal economy expected to occur 50% of the time, the expected return would be 5%.
2. (TCO 2) What would be the expected change to a 30-year bond’s market price or value if its YTM increases to 9.4%? Its YTM is now 9%, it has an 8% annual coupon, $1,000 face value, it is currently priced at $897.26, and its duration is eight years. (Points : 20)