Which of the following refers to the term "mortality rate"?
A. The success rate of new investments.
B. A one-period rate of interest expected on a bond issued at some date in the future
C. The probability that a borrower will default in any given year.
D. Historic default rate experience of a bond or loan.
E. The probability that a borrower will default over a specified multiyear period.
Ans: D. Historic default rate experience of a bond or loan.
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Ten years ago Bacon Signs Inc. issued twenty-five-year 8% annual coupon bonds with a $1,000 face value each. Since then, interest rates in general have risen and the yield to maturity on the Bacon bonds is now 9%
Given this information, what is the price today for a Bacon Signs bond? A) $1,000 B) $919.39 C) $901.77 D) $1.085.59
Use a binomial tree to value the following option. Assume rf = 0.04, rp =0.12, ? = 0.35, E(CF1 ) = $30, and cost = $300. What is the value of this project option?
A) $40.74 B) $50.60 C) $55.32 D) $62.12