1. Tomorrow your firm will issue 30K one-year zero-coupon bonds outstanding priced at $800 per bond. The bonds have a promised cash flow, i.e. face value ,of $900. If the firm does not default, it can fully repay the bonds. If the firm defaults, the value of assets will equal $25M and the firm will pay $3M in bankruptcy costs.

   What is the promised rate of return on these bonds?

   		0.13
   		0.11
   		0.25