The Default Rate of Demurrage Associates' New Customers Has Been

question 50

Multiple Choice

The default rate of Demurrage Associates' new customers has been running at 10 percent. The average sale for each new customer amounts to $800, generating a present value of profit of $100 and a 40 percent chance of a second order next year. The default rate on second orders is only 2 percent. If the interest rate is 9 percent, what is the expected profit from each new customer? (Examine only the first two periods of potential orders.)

• A)$88.70
• B)$47.74
• C)$43.25
• D)$50.83

---

Definitions:

Antianxiety Drugs

Psychotropic drugs that help reduce tension and anxiety. Also called minor tranquilizers or anxiolytics.

Alcohol Withdrawal

A syndrome that occurs in individuals who have been heavily drinking over a long period of time and then suddenly stop or significantly reduce their alcohol intake.

Cognitive-behavioral Treatment

A type of psychotherapy that focuses on changing negative patterns of thought and behavior into positive ones to treat various mental health conditions.

Cocaine Abuse

The harmful consumption of cocaine, a powerful stimulant drug, leading to a range of physical, psychological, and social problems.