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Analysts Estimate That a Bond Has an Equal Probability of Being

Question 9

Multiple Choice

Analysts estimate that a bond has an equal probability of being priced at either $940 or $1,050 one year from today.The bond is also callable at any time at $1,020.What is the expected value of this bond in one year?


A) $995
B) $980
C) $1,000
D) $1,020
E) $940

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