The Loughran Corporation has issued zero-coupon corporate bonds with a five-year maturity. Investors believe there is a 20% chance that Loughran will default on these bonds. If Loughran does default, investors expect to receive 25% of their promised payoff at maturity (e.g., $0.25 cents per dollar they are promised).

If investors require a 7.0% expected return on their investment in these bonds, which of the following statements most accurately describes the price (per $100 face value) and current YTM of these bonds?

A.

This bond is priced at $71.30 per $100 face value with a YTM of 7.0%.

B.

This bond is priced at $60.60 per $100 face value with a YTM of 10.5%.

C.

This bond is priced at $60.60 per $100 face value with a YTM of 7.0%.

D.

This bond is priced at $85.00 per $100 face value with a YTM of 3.3%.

E.

This bond is priced at $57.04 per $100 face value with a YTM of 11.9%