Question
An investor is adding one of Company X's two-year, zero coupon bonds to her portfolio of short term corporate bonds. She uses time value equations
"An investor is adding one of Company X's two-year, zero coupon bonds to her portfolio of short term corporate bonds. She uses time value equations and the Opportunity Investment Method to analyze potential purchases. Assuming no market or macro-economic disruptions, she expects a 90% probability that the the issuing company will provide its promised CF2 (of $100). She thinks there is a 10% probability that the company will screw up and pay a CF2 of only $60.
What is the weighted average, project-risk-adjusted CF2 for this potential investment? Round your answer to one decimal place.
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