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You own a 8% bond maturing in two years and priced at 85%. Suppose that there is a 11% chance that at maturity the bond
You own a 8% bond maturing in two years and priced at 85%. Suppose that there is a 11% chance that at maturity the bond will default and you will receive only 45% of all promised payments. Assume annual coupons.
a. What is the bonds promised yield to maturity? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
Promised yield %________
What is its expected yield? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. Expected yield % ________
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