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Bethany purchased a coupon bond for $950 today. She has the following expectation on the bond price in one year. Probability Bond Price 30% $1020
Bethany purchased a coupon bond for $950 today. She has the following expectation on the bond price in one year. Probability Bond Price 30% $1020 50% $980 20% $850 The bond paid an annual coupon of $30 three months ago. Which of the following can be used to find the expected return of the bond over the next12 months for Bethany? (Only one correct answer) (2 marks) 0.3+(1020-950/950+0.5*(980-950)/950+0.2*(850-950/950 0.3*(1050-950)/950+0.5*(1010-950)/950+0.2*(880-950)/950 0.3+(1020-950)/1020+0.5*(980-950)/980+0.2*(850-950)/850 (0.3*1020+0.5*980+0.2*850-950)/950 0.3*1020/950+0.5*980/950+0.2*850/950+30/950 The expected return is % (Round your answer to a percentage of 2 decimals without the "%" symbol. E.g. if you answer is 0.12345, you should input "12.35".) (1 mark)
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