Question
A bond with face value of $1,000 has annual coupons, promised coupon rate of 5%, and 5 years to maturity. Investors require an expected return
A bond with face value of $1,000 has annual coupons, promised coupon rate of 5%, and 5 years to maturity. Investors require an expected return of 3% from this bond. The probability of default is 3% per year and the loss given default is 60%.
(a) What is the yield-to-maturity of the bond?
(b) What is the price of the bond?
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Fundamental Accounting Principles
Authors: Larson Kermit, Tilly Jensen
Volume I, 14th Canadian Edition
978-0071051507
