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noname [10]
3 years ago
14

Suppose you have $10,000 to invest. A broker phones you with some information you requested on certain junk bonds. If the compan

y issuing the bonds posts a profit this year, it will pay you a 40 percent interest rate on the bond. If the company files for bankruptcy, you will lose all you invested. If the company breaks even, you will earn a 10 percent interest rate. Your broker tells you there is a 50 percent chance that they will break even and a 20 percent chance that the company will file for bankruptcy. Your other option is to invest in a risk-free government bond that will guarantee 8 percent interest for 1 year. A) What is the expected interest rate (rate of return) for the junk bond investment
Business
1 answer:
nikklg [1K]3 years ago
4 0

Answer:

the expected rate of return of the junk bond = 17%

Explanation:

the expected rate of return of the junk bond = (return if the company makes a profit x probability of the company making a profit) + (return if the company makes goes bankrupt x probability of the company going bankrupt) + (return if the company breaks even x probability of the company breaking even)

the expected rate of return of the junk bond = (40% x 0.3) + (0 x 0.2) + (10% x 0.5) = 12% + 0 + 5% = 17%

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Elevator pitch project
yanalaym [24]

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7 0
3 years ago
Nero signs a check "pay to the order of Olive" drawn on Nero's account in Plum Bank- Olive signs the back of the check. Secondar
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Answer:

A. Nero and Olive only

Explanation:

The primary liability is on Olive, and secondary liability is on both Nero and Olive. Secondary liability is a legal obligation that a party accepts on behalf of another party. In this case, Nero and Olive are liable for each other.

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6 0
3 years ago
Use the following to answer the questions.
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Answer:

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3 0
3 years ago
A company uses the weighted average method for inventory costing. At the beginning of a period the production department had 20,
DanielleElmas [232]

Answer:

181,500 units

Explanation:

Given that

Beginning work in progress inventory = 20,000 units

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3 years ago
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