Today Is January 1

question 33

Multiple Choice

Today is January 1.The interest rate is 8% and investors are convinced that it will stay at 8% for the next 10 years.A corporate bond comes on the market that for the next 7 years will pay $160 on December 31 to whoever owns the bond on that date.On January 1, 7 years from today, the issuer of the bond will redeem the bond by buying it back from the bondholder for $2,000.What should this bond sell for?

• A)$3,120
• B)$2,160
• C)$1,600
• D)$2,000
• E)$2,780

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Definitions:

Maximizing Law

The goal of behavior in a choice task, which is to obtain as many reinforcements as possible.

Consumer Choice Behavior

Refers to the process and factors influencing the decision-making of individuals when selecting among different products or services.

Matching Law

Matching Law is a principle in psychology that states individuals allocate their responses in direct proportion to the reinforcement received from those responses.

Momentary Maximization

The tendency of an organism to choose an option that provides immediate benefits, even if a different choice could yield a higher cumulative benefit over time.