Question
A zero-coupon bond with a market-beta of 0.3 promises to pay $1,000 in the first year. However, it may default and pay nothing with probability
A zero-coupon bond with a market-beta of 0.3 promises to pay $1,000 in the first year. However, it may default and pay nothing with probability 0.07. If the risk-free rate is 4.7%, the equity premium is 7.6%, and the CAPM is correct, what would be the bond price today?
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Financial Management Principles and Applications
Authors: Sheridan Titman, Arthur J. Keown, John H. Martin
13th edition
134417216, 978-0134417509, 013441750X, 978-0134417219
