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A zero coupon bond with face value of $1000, probability of default 10%, loss given default of 75%, and a 10-year maturity has price today
A zero coupon bond with face value of $1000, probability of default 10%, loss given default of 75%, and a 10-year maturity has price today equal to $900. (a) Compute the bond's (EAR) yield to maturity. (b) Compute the bond's annual expected return, assuming default can only happen at the end of the 10 years
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