A bond has a current value of $950 and promises to pay $1,000 at the end of 4 years. The expected return on the asset is 12% and the risk free rate is 3%

If the actual cash payout in case of default is 0, what is the true default probability given that the asset has a standard deviation of 18%?
A) 15.2%
B) 21.5%
C) 33.2%
D) 49.6%


B

Business

You might also like to view...

According to the factor-endowment theory,

a. the abundant factor gains from trade. b. the scarce factor gains from trade. c. those disadvantaged by trade outnumber those advantaged by trade. d. everyone necessarily benefits from trade.

Business

Exchange-rate fluctuations have little effect on the attractiveness of a potential target market

Indicate whether the statement is true or false

Business

________ are offers to do something for the respondents in order to ________ the probability that the respondents will participate in the survey

A) Incentives; increase B) Incentives; decrease C) Bribes; increase D) Bribes; decrease E) none of the above

Business

Which of the following may appear in a code of ethics?

A. the purpose of the company B. deeply held beliefs that most organizational employees share C. rules for how to handle every ethical dilemma D. rules around gender and racial discrimination

Business