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Grummon Corporation has issued zero-coupon corporate bonds with a five- year maturity. Investors believe there is a 20% chance that Grummon will default on these
Grummon Corporation has issued zero-coupon corporate bonds with a five- year maturity. Investors believe there is a 20% chance that Grummon will default on these bonds. If Grummondoes default, investors expect to receive only 50 cents per dollar they are owed. If investors require a 6% expected return on their investment in these bonds, what will be the price and yield to maturity on these bonds? ( assume that the face value of the bond is 100 )
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