If the Annual Interest Rate Is 8%,what Would You Expect

question 1

Multiple Choice

If the annual interest rate is 8%,what would you expect to pay for a discount bond paying $10,000 in ten years?

• A) $4,632
• B) $9,259
• C) $10,000
• D) $21,589

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Definitions:

Well-Diversified Portfolio

An investment portfolio that spreads risk and opportunity across a wide range of assets and sectors, aiming to reduce the impact of any single investment's poor performance.

Diversifiable Risk

A type of investment risk that can be reduced through diversification, relating to factors affecting specific industries, companies, or securities rather than the market as a whole.

Publicly Traded Stocks

Stocks of companies that are traded on public stock exchanges, making them available to buy and sell by investors.

True Market Portfolio

An optimal portfolio that includes all available assets in the market, their proportions reflecting their market values, as suggested by the Capital Asset Pricing Model.