Question: 1 What are the main differences between stocks and bonds? What are the advantages and disadvantages between a common stockholder, preferred, stockholder and bondholder? Question

1 What are the main differences between stocks and bonds? What are the advantages and disadvantages between a common stockholder, preferred, stockholder and bondholder?

Question 2 What are Standard and Poor's long-term and short-term credit rating scales? As an investor do you find these useful?

Section B -Answer ALL Question 1 The modified duration and convexity of a 6%, 25 year bond selling to yield 9% is 10.62 and 91.46 respectively. If the required yield increases by 300 basis points from 9% to 12% what is the approximate percentage change in the price of the bond due to

a) duration,

b) convexity,

c) duration and convexity?

d) If the actual change is -26.50%, compare your results from a) and c) which provides a better approximation

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