We know that bonds are affected by change in interest rates. You currently hold a bond with a yield of 4% and the following 2 scenarios are possible for the economy. What is the expected yield of your bond?

Economic scenario

Probability Bond Yield

interest rates decline: 70%. 15%

interest rates stay constant. 30%. 4%

Group of answer choices

12.6%

1.22%

31.5%

11.7%

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