Analysts Estimate That a Bond Has an Equal Probability of Being

question 9

Multiple Choice

Analysts estimate that a bond has an equal probability of being priced at either $940 or $1,050 one year from today.The bond is also callable at any time at $1,020.What is the expected value of this bond in one year?

• A)$995
• B)$980
• C)$1,000
• D)$1,020
• E)$940

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Definitions:

Legal Persons

Entities (such as individuals, companies, and organizations) that have legal rights and obligations, including the capacity to enter into contracts, sue, and be sued.

Federal And State Statutes

Laws enacted by the federal or state legislatures that govern various aspects of society and business.

Social Contract

A theory in political philosophy suggesting that individuals have consented, either explicitly or tacitly, to surrender some of their freedoms and submit to an authority in exchange for protection of their remaining rights.

John Locke

A 17th-century English philosopher known for his work on political philosophy and theory of knowledge.