The promised yield, today, is 13% for a two-year, 10%-coupon-rate, $1,000-face-value bond that has just distributed its first coupon. The fundamentals of the company indicate that if the bond goes into default, only 80% of the coupon and face value will be paid. What is the default rate of this bond given that a no-default bond yields 8% in the market?

Answer rating: 100% (QA)

To solve this problem we need to calculate the default rate of the bond given the provided informati... View the full answer