At Joe's Restaurant,80 Percent of the Diners Are New Customers

question 27

Multiple Choice

At Joe's Restaurant,80 percent of the diners are new customers (N) ,while 20 percent are returning customers (R) .Fifty percent of the new customers pay by credit card,compared with 70 percent of the regular customers.If a customer pays by credit card,what is the probability that the customer is a new customer?

• A)0.7407
• B)0.8000
• C)0.5400
• D)0.5000

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Definitions:

Risk-Free Interest

The rate of return on an investment with no risk of financial loss, typically associated with government bonds.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Straight Bond Value

The value of a bond that pays a fixed interest rate (coupon rate) and does not have any embedded options such as convertibility or callability.

Convertible Bond

A bond that offers the option to be exchanged for a specific quantity of the issuing company's stock at chosen intervals throughout its tenure, generally at the choice of the person holding the bond.