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all parts please! A corporate bond was issued a few years ago at face value of $1,000 with a YTM of 7% and quarterly paid
all parts please!
A corporate bond was issued a few years ago at face value of $1,000 with a YTM of 7% and quarterly paid coupons. Now with 12 years left until the maturity, the company has run into hard times and the yield to maturity has increased to 15%. 1) What is the bond price now? 2) Suppose the company defer the loss to future and will make good on the promised coupon payments. However, the deferred loss will finally drive the company out of business at the maturity of this bond. It's estimated that investors will lose all the face value with a probabilty of 30%, receive 50% of the face value with a probability of 40%, and 80% of the face value with 30% probability. What is the expected value investors will receive at maturity? 3) Given the calculated expected value received at maturity, how should investors adjust their estimate of the YTM? A corporate bond was issued a few years ago at face value of $1,000 with a YTM of 7% and quarterly paid coupons. Now with 12 years left until the maturity, the company has run into hard times and the yield to maturity has increased to 15%. 1) What is the bond price now? 2) Suppose the company defer the loss to future and will make good on the promised coupon payments. However, the deferred loss will finally drive the company out of business at the maturity of this bond. It's estimated that investors will lose all the face value with a probabilty of 30%, receive 50% of the face value with a probability of 40%, and 80% of the face value with 30% probability. What is the expected value investors will receive at maturity? 3) Given the calculated expected value received at maturity, how should investors adjust their estimate of the YTM Step by Step Solution
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