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Grummon Corporation has issued zero-coupon corporate bonds with a five-year maturity (assume $100 face value bond). Investors believe there is a 15% chance that Grummon
Grummon Corporation has issued zero-coupon corporate bonds with a five-year maturity (assume $100 face value bond). Investors believe there is a 15% chance that Grummon will default on these bonds. If Grummon does default, investors expect to receive only 55 cents per dollar they are owed. If investors require a 6% expected return on their investment in these bonds, what will be the a. price of these bonds? b. yield to maturity on these bonds? Note: Assume annual compounding. a. What will be the price of these bonds? The price of these bonds is $ (Round to the nearest cent.)
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