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Sir there is an mcq in kit that in relation to irredeemable security paying a fixed interest rate which of the following statement is correct
And the answer is that As risk rises, market value of security will fall to ensure that investors receive an increased yield.
Sir can you please explain me this? And also in which chapter of OT notes this is covered?
Higher risk means a higher required return (i.e. yield).
Higher required return means lower market value (because the market value is the PV of future returns discounted at investors required return).Chapter 15 (and the lectures that go with it). But there is no point in watching lectures at random – they are a complete course and should be watched in order because the chapters build upon each other.
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