In extending an expense item for the current budget year, an often-used and useful approach is to

A)

use last year's figure.
B)

use the average of the last three years.
C)

use last year's figure plus a usual 10% "fudge factor."
D)

adjust last year's figure upwards by this year's expected inflation.

D

Business

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Indicate whether the statement is true or false

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A firm has a single issue of a zero coupon debt that promises to pay $90 in 4 years, and the A0 = $100, r = 4%, ? = 25%, and ? = 0. If the asset has a 2% chance of total default, what is the value of the debt?

A) $67.10 B) $75.19 C) $85.62 D) $90.00

Business