What Is the Price of a 2-Year Equity-Linked CD Under

question 2

Multiple Choice

What is the price of a 2-year equity-linked CD under the following terms? No coupon is paid.At maturity the CD pays 80.0% of the S&P 500 index appreciation.The S&P 500 price = 900,div = 0.02,σ = 0.20,and interest rates are 5.0%.

• A) $890.22
• B) $990.23
• C) $1064.20
• D) $1110.55

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Target Return-on-sales Pricing

A pricing strategy where the price is set based on a target return on the sales revenue generated, aiming for a specific profit margin.

Variable Costs

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Fixed Cost

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