Consider a one-year corporate bond that has a 20% probability of default. The payoff on the bond is $2,000 if the corporation does not default. The interest rate is 10%. If buyers of this bond are risk-neutral, this bond will sell for:
A. $909.09
B. $1,454.54
C. $1,600
D. $400
Answer: B
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A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule:Production Possibilities ScheduleProductABCDEFSteel012345Wheat100907555300If the nation uses all of its resources to produce only wheat, then its production combination will be
A. A. B. B. C. F. D. E.
If the CPI this year is 240 and the CPI in the previous year was 200, what is the annual inflation rate?
A) 20.0 percent B) 50 percent C) 16.7 percent. D) -16.7 percent E) 40.0 percent
The price of an nonrenewable resource is expected to rise at a rate equal to the
A) rate of supply. B) rate of population growth. C) rate of demand. D) interest rate.
What is the best explanation for why China and India have received so much international interest and foreign investment?
A) Their large populations B) Their geographic location C) Their control over natural resources D) Government incentives provided to foreign firms