On a Particular Production Line, the Likelihood That a Light

question 117

Multiple Choice

On a particular production line, the likelihood that a light bulb is defective is 5%. Ten light bulbs are randomly selected. What is the probability that none of the light bulbs will be defective?

• A) 0.0105
• B) 0.0746
• C) 0.3151
• D) 0.5987

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Definitions:

Duration

A measure of the sensitivity of the price of a bond or other debt instrument to changes in interest rates.

Yield To Maturity

The total return anticipated on a bond if it is held until the date it matures, including all payments of principal and interest.

Immunization

A strategy that matches durations of assets and liabilities so as to make net worth unaffected by interest rate movements.

Interest-Rate Risk

The potential for investment losses due to fluctuations in interest rates, affecting particularly fixed-income securities.