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Problem 23-1 Expected yield You own a bond with an annual coupon rate of 7% maturing in two years and priced at 86%. Suppose that
Problem 23-1 Expected yield
You own a bond with an annual coupon rate of 7% maturing in two years and priced at 86%. Suppose that there is a 10% 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? 15.69%
b. What is its expected yield (i.e., the possible yields weighted by their probabilities)? NEED HELP
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