Bonds with credit risk 5. Consider a risky pure discount bond with par value $1,000 and time to maturity of 10 years. Credit analysis suggests a PD of 8% and a LGD of 30%. a) What is the expected loan loss at maturity? b) Suppose the current bond price is $800. What is your expected annual return if you buy the bond at this price and hold it until maturity? c) What is the YTM of the bond at the current price of $800? Explain why it differs from the expected return computed in part b)