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Elementary,Middle School,High School,College,University,PHD
| Teaching Since: | May 2017 |
| Last Sign in: | 398 Weeks Ago, 4 Days Ago |
| Questions Answered: | 66690 |
| Tutorials Posted: | 66688 |
MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Quota
Junk bonds can be profitable as well as risky. Why are investors willing to consider junk bonds? Suppose you can buy junk bonds at a tremendous discount. You try to choose “good” companies with a “good” product. The company should have done well but for some reason did not. Suppose you consider only companies with a 35% estimated risk of default, and your financial investment goal requires four bonds to be “good” bonds in the sense that they will not default before a certain date. Remember, junk bonds that do not default are usually very profitable because they carry a very high rate of return. The other bonds in your investment group can default (or not) without harming your investment plan. Suppose you want to be 95% certain of meeting your goal (quota) of at least four good bonds. How many junk bond issues should you buy to meet this goal?
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