Question 27

Explain efficient-market hypothesis (EMH)?

Question 28

Explain the following theory and link them with the yield curve

Expectations theory

Liquidity preference theory

Market segmentation theory

Question 29

Explain the characteristics that make Preferred stocks called cumulative preferred stocks and hybrid securities

Question 30

Describe the key differences between Bonds and Stocks.

Question 31

Differentiate between the Net Present Value (NPV) and the Internal Rate of Return (IRR) on an investment. What conditions must NPV and IRR fulfil in order to accept an investment project?

Question 32

What relationship between the required return (ytm) and the coupon interest will cause a bond to:

Be priced at a discount?

Be priced at a premium?

Be priced at its par value?

Question 32

In your own words, explain the terms risk and return, and describe the general method of finding a rate of return on an investment. Also explain what is meant by the term risk-averse investors.