You Have Invested in a Project That Has the Following

question 15

Multiple Choice

You have invested in a project that has the following payoff schedule: Probability of
Payoff Occurrence
$40 .15
$50 .20
$60 .30
$70 .30
$80 .05
What is the expected value of the investment's payoff? (Round to the nearest $1.)

• A) $60
• B) $65
• C) $58
• D) $70

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Definitions:

Default Risk Premium

The additional amount a borrower must pay to compensate the lender for assuming the risk that the borrower may default on the loan.

Clean Price

The price of a bond excluding any accrued interest; the price the bond is actually quoted at in the financial markets.

Call Provision

A clause in a bond or other fixed-income security that allows the issuer to repay the bond before its maturity date.

Canada Yield Curve

A plot of the yields on Government of Canada notes and bonds relative to maturity.