Question
You own a 5% bond maturing in two years and priced at 87%. Suppose that there is a 10% chance that at maturity the bond
You own a 5% bond maturing in two years and priced at 87%. Suppose that there is a 10% chance that at maturity the bond will default and you will receive only 40% of the promised payment.
What is the bond's promised yield to maturity?
What is its expected yield?
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Analysis for Financial Management
Authors: Robert c. Higgins
8th edition
73041807, 73041803, 978-0073041803
