Your investment banking firm has estimated what your new issue of bonds is likely to sell for under several different economic conditions. What is the expected (average) selling price of each bond?
Recession Steady Boom
Probability .25 .65 .10
Bond price $970 $1,000 $1,150
A) $1,000.00
B) $1,007.50
C) $1,040.00
D) $1,100.33
Answer: B
Explanation: B) Expected payoff = Σ payoffi × probabilityi = .25 ∗ $970 + .65 ∗ $1,000 + .10 ∗ $1,150 = $1,007.50.
Business
You might also like to view...
Companies seldom solicit ideas from customers during the idea generation stage of product development
Indicate whether the statement is true or false
Business
Many changes have been made to the Constitution by the constitutional method of amending
Indicate whether the statement is true or false
Business