The Default Rate of Don's New Customers Has Been Running

question 85

Multiple Choice

The default rate of Don's new customers has been running at 20%.The average sale for each new customer amounts to $500,generating a present value of profit of $200 and a 30% chance of a second order next year.The default rate on second orders is only 5%.If the interest rate is 6%,what is the expected profit from each new customer?

• A)$152.50
• B)$149.53
• C)$275.00
• D)$139.62

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Definitions:

U.S. Senate

One of the two chambers of the United States Congress, comprising 100 senators who represent the 50 states, with each state having two senators regardless of population.

Party Whips

Officials in political parties whose primary purpose is to ensure party discipline, keeping members in line with the party's policies and voting as the party leadership desires.

Leaders' Wishes

The desires or intentions of individuals in positions of leadership, often guiding decision-making and strategic directions.

Pocket Veto

A legislative maneuver where the President indirectly vetoes a bill by refusing to sign it into law within ten days, and Congress adjourns during this period.