Assume we live in a single-factor world, where the market is the only factor and assets are correctly priced. The expected market return is 5%, and the risk-free rate is 3%.

Consider a risky zero-coupon bond with a face value of $100 that matures in exactly 6 years. Initially, the beta of the bond is 0.4, and the initial yield to maturity of the bond is 10%.

If the beta doubles but the bonds expected cash flows and face value remain unchanged, what will be the new yield to maturity of the bond? Please choose the answer that is closest to the correct answer.

Group of answer choices

17.00\%

10.85\%

13.98\%

9.61\%

12.26\%