A Zero-Coupon Bond Has a Beta of 0

question 60

Multiple Choice

A zero-coupon bond has a beta of 0.1 and promises to pay $1,000 next year with a probability of 98%. If the bond defaults, it will pay nothing. One-year Treasury securities are yielding 5%, and the equity premium is 7%.
-Refer to the information above. What is the promised rate of return on this bond? Round your answer to the nearest tenth of a percent.

• A)7.9%
• B)2.0%
• C)5.7%
• D)5.2%

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Listening

The active process of receiving, interpreting, and responding to verbal and nonverbal messages.

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Having the ability to understand and share the feelings of another; showing empathy.

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Displaying intense and eager enjoyment, interest, or approval.

Self-concept Theory

A psychological framework that suggests people's behavior is influenced by their perceptions and attitudes towards themselves.