Several years ago, Millstone Ltd issued $1,000 face value zero-coupon bonds. Now, with five years left to maturity on the bonds, the company is experiencing financial difficulties. Investors think that there is a 40% chance that the company will default on these bonds. If the company defaults, investors expect to receive only 25% of the face value at maturity. If an investor were to purchase the bond today, calculate the price the investor is willing to pay for this bond assuming that investors demand a 6% expected return on their investment in these bonds.

Group of answer choices

$523

None of these alternatives

$383

$612

$465