**** PLEASE USE IRR TO ANSWER PART B BOTH 12.84 AND 11.06 ARE WRONG ANSWERS ******

You own a bond with an annual coupon rate of 5% maturing in two years and priced at 86%. Suppose that there is a 8% chance that at maturity the bond will default and you will receive only 44% of the promised payment. Assume a face value of $1,000. a. What is the bonds promised yield to maturity? (Enter your answer as a percent rounded to 2 decimal places.)

13.44 IS THE CORRECT ANSWER HERE

b. What is its expected yield (i.e., the possible yields weighted by their probabilities)? (Enter your answer as a percent rounded to 2 decimal places.)

12.84 AND 11.06 ARE WRONG PLEASE USE IRR TO ANSWER THIS ONE