Problem 10.28 – Probability analysis of long-term corporate bonds and T-bills

Essentials of Corporate Finance

Ross, Westerfield, and Jordan

10th Edition and 11th Edition

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Difficulty – Medium

Calculate the probability of various returns on long-term corporate bonds and T-bills. Specifically, determine the probability of returns greater than 10%, less than 0%, and between certain values. Also, determine the likelihood of a low return on long-term corporate bonds recurring and a high return on T-bills recurring in the future.

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