Short Term Inc. has issued zero-coupon bonds that mature in one year. The returns from holding these bonds have a beta of 0.25. There is a chance of 70% that the bonds will pay full value, and a chance of 30% that they will only be worth 60 cents for each dollar of face value.

Assume that the CAPM holds, that the riskless rate is 5% and that the expected return on the market is 15%.

1) What is the current price of the bonds, per $100 face value?

2) What is the yield to maturity on the bonds?

3) What is the expected return on the bonds?