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
b
Economics
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