If the current risk-free rate is 2.5%, what is the expected 1-year return on the bond?
A. -0.9%
B. 2.1%
C. 4.9%
D. 7.5%
Answer:B
If the current risk-free rate is 2.5%, what is the expected 1-year return on the bond?
A. -0.9% B. 2.1% C. 4.9% D. 7.5%
Explanation: The expected return of the bond, in percent, can be calculated using the following equation: