Question: QUESTION 4 ( 4 Marks ) Fully explain what is meant by the following terms in relation to a security or a fund. a) Alpha

QUESTION 4 ( 4 Marks )

Fully explain what is meant by the following terms in relation to a security or a fund.

a) Alpha

b) Beta

Question 6 (4 Marks)

Use the following information for a bond to calculate:

a) the Macaulay Duration of the bond and; (2 Marks) b) the Modified Duration of the bond explaining the significance of modified duration (2 Marks)

5 year maturity Coupon of 10% 6% yield to maturity

Note: For the modified duration you may assume a change in yield of 1%

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