QUESTION 37: A zero-coupon bond has a beta of 0.1 and promises to pay $1,000 next year with a probability of 98%. If the bond defaults, it will pay nothing. One-year Treasury securities are yielding 5%, and the equity premium is 7%.

Part a. What is the time premium for this bond investment?

Question a options:

	5.5%
	2.3%
	4.5%
	5%

b. What is the risk premium for this bond investment?

Question b options:

	2.3%
	1.7%
	1.0%
	0.7%

c. What is the fair market value of the bond?

Question c options:

	937.15
	927.15
	947.15
	955.15

d. What is the promised rate of return on this bond? Round your answer to the nearest tenth of a percent.

Question d options:

	4.5%
	9.9%
	7.9%
	8.3%

PLEASE NO HANDWRITTEN ANSWERS AND SHOW FORMULAS TO GET CORRECT ANSWERS