Problem $24-1$ Expected yield

You own a bond with an annual coupon rate of $5\%$ maturing in two years and priced at $87\%.$ Suppose that there is a $10\%$ chance that at maturity the bond will default and you will receive only $40\%$ of the promised payment. Assume a face value of $$1,000.$

a$.$ What is the bond's promised yield to maturity?

b$.$ What is its expected yield $($i$.$e$.,$ the possible yields weighted by their probabilities$)?$

Note: Enter your answers as a percent rounded to $2$ decimal places.

$\backslash$table$[[$a$.$ Promised yield,,$\%$