In Order to Approximate the Binomial Distribution Using the Normal

question 142

Multiple Choice

In order to approximate the binomial distribution using the normal distribution, the following condition(s) must be met if p is near 1.

• A) np > 5 only
• B) n must be larger than just meeting the condition of np > 5.
• C) n can be as small as np > 5.
• D) n > 5

Calculate the price of bonds given different market conditions, including interest rates and time to maturity.

Understand the impact of inflation on investment returns and how to calculate real returns.

Describe the characteristics of zero-coupon bonds and calculate their value at different points in time.

Recognize the terms related to bonds, such as face value, market price, coupon rate, and yield to maturity.

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Definitions:

Maturity

The date on which a debt must be paid back in full or the final payment is due.

Price Sensitivity

The degree to which the price of a product or service affects consumers' purchasing decisions.

Interest Rates

The cost of borrowing money or the return earned from lending money, expressed as a percentage of the principal.

Maturity

The date on which the final payment of a loan, bond, or other financial instrument is due to be paid, marking the end of the instrument's term.