The Default Rate of Demurrage Associates' New Customers Has Been

question 45

Multiple Choice

The default rate of Demurrage Associates' new customers has been running at 10%. The average sale for each new customer amounts to $800, generating a profit of $100 and a 40% chance of a repeat order next year. The default rate on repeat orders is only 2%. If the interest rate is 9%, what is the expected profit from each new customer?

• A) $88.70
• B) $47.75
• C) $43.25
• D) $50.83

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Definitions:

Production Possibility Frontier

A curve depicting all maximum output possibilities for two goods, given a set of inputs and production technology.

International Trade

The swapping of commodities and services among different nations.

Unskilled Workers

Individuals who lack specialized skills, training, or qualifications for particular jobs or industries.

Imports

Goods and services purchased from other countries.