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Answering an essay question on a midterm examination, a finance student writes these two statements:
Statement 1: The value of a fixed income security is the sum of the present values of all its expected future coupon payments.
Statement 2: The steps in the bond valuation process are to estimate the bond’s cash flows, determine the appropriate discount rate, and calculate the present value of the expected cash flows.
With respect to the student's statements: A. both are correct. B. both are incorrect. C. only one is correct. |