Suppose That Albert Can Buy a Bond for $1,000 That

question 114

Multiple Choice

Suppose that Albert can buy a bond for $1,000 that matures in two years and pays Albert $1,102.5 with certainty.He is indifferent between this bond and one that has some risk but on which the interest rate is 3% higher.How much,to the nearest penny,does the riskier bond pay in two years?

• A)$1,160.00
• B)$1,166.40
• C)$1,168.65
• D)$1,169.64

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Definitions:

Analyze Ideas

The systematic examination of concepts or proposals to understand their components, relationships, and implications.

Persistent

The quality of continuing steadfastly or firmly in a course of action in spite of difficulty or opposition.

Mental Models

Internal representations of external reality that people use to understand and interact with the world around them, influencing decision-making and behavior.

Social Approval

The affirmative recognition or endorsement from others within a social context, often influencing behavior and decisions.