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Expect that the answers are 300.1] a] Corporate debt 300.2] b] is false. Sounds like the two definitions are interchanged. 300.3] d] Both are true. Preferred stocks have characteristics of both equity and debt, but are technically equity.

I'd expect the answers to be: 301.1] d: Decrease the bond price by 14.58 (assuming premium applies to both periods) or c: Decrease the bond price by $7.30 (assuming premium applied only to first period) There's some ambiguity in the question about whether the premium has to be applied only to...

Here's my take: 310.1] a] 0.140: With the listed assumptions about covariance, it can be shown that Cov(a(i), a(j)) = Beta(i)*Beta(j). 310.2] c] 15.90%: Caculate the standard normal variate with the given values, and it reads at -1, approximately. Look up the normal tables, and the area such...

.2 and .3 are great questions, I must add. I read the material covering this AIM last week, and just solving this question reviews the entire AIM. Thanks!

Think the answers should be: 300.1 (b) 858 : Use backward induction with a terminal price of 100 and discount using rate at that node and expected price using risk neutral probability as weights. No coupons involved, so pretty straight-forward. 300.2 (c) is false: Short term rates clearly have a...