Try to Find Some Reasons Why

question 6

Essay

Try to find some reasons why:
a. Stock and bond markets should be strongly correlated and,
b. Stock and bond markets should be weakly correlated.

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Definitions:

Treasury Bonds

Long-term government securities issued with the promise to pay periodic interest and repay the principal at maturity.

Expected Cash Flows

The anticipated movement of cash in and out of a business over a future period, often used in financial forecasting.

Opportunity Cost

The loss of potential gain from other alternatives when one alternative is chosen.

Present Value

The value of a future amount of money in today's terms, discounted at a particular rate.