Posted by **Anonymous** on Wednesday, February 13, 2013 at 4:02pm.

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:

ECONOMIC FORECAST INTEREST RATE FORECAST

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?

## Answer this Question

## Related Questions

- finance - Austin Electronics expects sales next year to be at $900,000 if the ...
- finance - Austin Electronics expects sales next year to be at $900,000 if the ...
- finance - A firm wishes to maintain an internal growth rate of 4.5 percent and a...
- math - A bond has an average return of 6.8 percent and a standard deviation of 4...
- Finance - Marcel Co is growing quickly. Dividends are expected to grow at a 30 ...
- managerial finance - The growth rate in dividends for IBM for the next five ...
- Finance - Thirsty Cactus Corp. just paid a dividend of $1.25 per share. The ...
- Finance - The next dividend payment by Hot Wings, Inc., will be $2.10 per share...
- Statistics - Calculate each binomial probability: a. Fewer than 4 successes in ...
- Statistic - 6.18 Calculate each binomial probability: a. Fewer than 4 successes ...