Ignoring the time value of money, how much does a firm lose on a $2,000 sale that has a 30% profit margin if the 20% probability of default occurs?
A) $120
B) $280
C) $600
D) $1,400 Students must, of course, distinguish between expected losses and actual losses:
Loss = Sales revenue - profit margin
= $2,000 - (.3 x $2,000)
Correct Answer:
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