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Corporate Finance · Quiz 2 · 1 Dec 2024 · September 2024 term

Question 3: Suppose a 1-year government bond is offering a 10% rate o…

Question 3

+1 markOne correct option

Suppose a 1-year government bond is offering a 10% rate of return. Ankit has Rs 10,000, which he can invest in government bonds or lend to his friend Suresh. He believes that Suresh will pay back the promised amount with an 80% probability and will pay back nothing with a 20% probability. What is the default premium that Ankit should ask from Suresh?

  1. A

    37.50%

  2. B

    27.50%

  3. C

    17.50%

  4. D

    10.00%

Show answer

Correct answer

  • B

    27.50%

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Question 3 of 25 in the IIT Madras BS Corporate Finance (Corporate Finance) Quiz 2 paper sat on 1 Dec 2024, in the September 2024 term (IIT M DEGREE AN EXAM QDB2 01 Dec 2024). It carries 1 mark.

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