Calculate the Expected Return on a $6,000 Bond That Pays

question 119

Multiple Choice

Calculate the expected return on a $6,000 bond that pays 6 percent of face value and whose price has a 30-percent chance of falling by $1,000 and a 70-percent chance of rising by $1,000.

• A)$360
• B)-$760
• C)$650
• D)$950
• E)-$40

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Definitions:

Formulas

Prescribed sets of instructions or rules expressed in mathematical symbols and operations designed to solve problems or calculate values.

Vendor Managed Inventory (VMI)

A supply chain initiative where the supplier assumes the responsibility of managing inventory levels for the customer.

Outsourcing

The business practice of hiring a party outside a company to perform services and create goods that traditionally were performed in-house by the company's own employees and staff.

Holding Cost Rate

The percentage of the value of inventory held over a certain period of time as costs, including storage, insurance, and depreciation.