Bond Yields & Portfolio Diversification Essay

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Abierto Pagado a la entrega Termina en 6 días

I need an essay of 2,500 words in total on two topics relating to finance and investments.

1) Using illustrative examples, distinguish between the interest yield and the redemption yield of a bond, and discuss the likely consequences for the above yields if the default risk of a bond increases.

2) Show, using a hypothetical example, how diversification can reduce portfolio risk and analyse how dependent is the effect of such diversification on the coefficients of correlation between returns on the various securities in the portfolio.

The essay should adopt a balanced approach of both theoretical explanations and practical examples, written in a formal academic style with an introduction, body and conclusion.

Please note:

- A comprehensive understanding of the time value of money and the nature of interest rates is vital.

- The essay should reflect knowledge of different sources of finance.

- Accurate calculations of the fair value of bonds and shares are necessary.

- The relationship between risk and return should be understood.

- The essay should illustrate how appropriate diversification reduces risk.

Please ensure to add some references that are formatted in AU Harvard style.

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