XYZ LTD Yesterday issued a $1000 per value 5 year bond in evaluating any capital budgeting proposal xyz has historically utilized a required rate of return of 25% as a purchaser of the bond you know that you will have to report your receipt of investment income of $120 each year of your personal income tax return you paid $950 for the bond upon issuance of the bond.

Your analysis of the equity market leads you to conclude that

The yield on a common share of xyz is 10%

The beta of a common share of xyz is 2.1

The yield on a preferred share of xyz is 14%

Required

What yield did you use for the purchase of the bond. Show all necessary supporting calculations.

Explain in bullet point form why the bond sold at $950