Cosmetics giant Revlon Inc, hard hit by the Covid-19 pandemic, is seeking to exchange its 5.75% bonds due in 2021 (assume 1-year from now and a semi-annual coupon) for new notes with the same coupon maturing in 2024 (assume 4-years from now). Revlon is asking bondholders to take a haircut of 25 cents on the dollar from par value of 100 . What is the expected annual yield-to-maturity (YTM) if an investor buys a 2021 bond today at $750 and she does not participate in the swap (ie: holds to maturity)? Assume Revlon remains solvent and the haircut turns out to be 25 cents at maturity. You and your firm believe that the Revlon bond swap is just reshuffling the deck chairs on the Titanic. As such, you expect bondholders to end up taking a 90% haircut on their principal in these 2024 bonds. The new bonds, selling at par, pay only a 2% coupon semi-annually. Calculate the annual default risk premium based on your expectations. a. 2021YTM=1.85%;2024 default risk premium 2183bp b. 2021YTM=7.67%;2024 default risk premium 2383 bp c. 2021YTM=1.85%;2024 default risk premium 2383bp d. 2021YTM=7.67%;2024 default risk premium 2183bp e. 2021YTM=7.67%;2024 default risk premium 4566 bp Cosmetics giant Revlon Inc, hard hit by the Covid-19 pandemic, is seeking to exchange its 5.75% bonds due in 2021 (assume 1-year from now and a semi-annual coupon) for new notes with the same coupon maturing in 2024 (assume 4-years from now). Revlon is asking bondholders to take a haircut of 25 cents on the dollar from par value of 100 . What is the expected annual yield-to-maturity (YTM) if an investor buys a 2021 bond today at $750 and she does not participate in the swap (ie: holds to maturity)? Assume Revlon remains solvent and the haircut turns out to be 25 cents at maturity. You and your firm believe that the Revlon bond swap is just reshuffling the deck chairs on the Titanic. As such, you expect bondholders to end up taking a 90% haircut on their principal in these 2024 bonds. The new bonds, selling at par, pay only a 2% coupon semi-annually. Calculate the annual default risk premium based on your expectations. a. 2021YTM=1.85%;2024 default risk premium 2183bp b. 2021YTM=7.67%;2024 default risk premium 2383 bp c. 2021YTM=1.85%;2024 default risk premium 2383bp d. 2021YTM=7.67%;2024 default risk premium 2183bp e. 2021YTM=7.67%;2024 default risk premium 4566 bp