Assume That F₁ = 13

question 37

Multiple Choice

Assume that f₁ = 13.50 per cent and c₁ = 17.40 per cent. Which of the following statements is true?

• A) The expected default probability of repayment is 96.10 per cent.
• B) The expected probability of repayment is 3.32 per cent.
• C) The one-year rate expected on corporate securities one year into the future is 13.50 per cent.
• D) The current one-year rate on corporate securities is 17.40 per cent.

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Definitions:

Machinists

Skilled workers who operate machine tools to fabricate parts and instruments.

Labor Supply

The total hours that workers wish to work at a given wage rate, in a given time period.

Payroll Tax

Taxes levied on employers or employees, and are based on the salary or wages of employees. These taxes fund social security and healthcare programs.

Elastic

describes a condition in which the quantity demanded or supplied of a good or service is highly responsive to changes in its price.