A Zero-Coupon Bond Has a Beta of 0

question 36

Multiple Choice

A zero-coupon bond has a beta of 0.15 and promises to pay $5,000 next year with a probability of 96%, $1,000 with a probability of 2%, and there is a 2% probability of total default. One-year Treasury securities are yielding 4%, and the expected return on the market is 10%.
-Refer to the information above. What is the risk premium for this bond investment?

• A)3.9%
• B)4.0%
• C)5.3%
• D)0.9%

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Definitions:

Unchecked Exceptions

In programming, especially Java, these are the exceptions that are not checked at compile-time but at runtime.

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Catch Blocks

Sections of code in many programming languages that are used to handle exceptions or errors during program execution.