Purchase Solution

Risk and Return

Not what you're looking for?

Ask Custom Question

Given her evaluation of current economic conditions, Ima Nutt believes there is a 20 percent probability of recession, a 50 percent chance of continued steady growth, and a 30 percent probability of inflationary growth. For each possibility, Ima has developed an interest rate forecast for long-term Treasury bond

Interest Rates:


Recession: 6 percent
Constant growth: 9 percent
Inflation: 14 percent

a. What is the expected interest rate under Ima's forecast?
b. What is the variance and standard deviation of Ima's interest rate forecast?
c. What is the coefficient of variation of Ima's interest rate forecast?
d. If the current long-term Treasury bond interest rate is 8 percent, should Ima consider purchasing a Treasury bond? Why or why not?

Purchase this Solution

Solution Summary

Interest and Treasury Bond Calculation and evaluation

Purchase this Solution

Free BrainMass Quizzes
Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Business Ethics Awareness Strategy

This quiz is designed to assess your current ability for determining the characteristics of ethical behavior. It is essential that leaders, managers, and employees are able to distinguish between positive and negative ethical behavior. The quicker you assess a person's ethical tendency, the awareness empowers you to develop a strategy on how to interact with them.

Academic Reading and Writing: Critical Thinking

Importance of Critical Thinking

Learning Lean

This quiz will help you understand the basic concepts of Lean.