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You own a bond with an annual coupon rate of 5% maturing in two years and priced at 85%. Suppose that there is a 23%

You own a bond with an annual coupon rate of 5% maturing in two years and priced at 85%.

Suppose that there is a 23% chance that at maturity the bond will default and you will receiveonly 45% of the promised payment. Assume a face value of $1,000.

A. What is the bond's promised yield to maturity?

B. What is its expected yield (i.e., the possible yields weighted by their probabilities)?

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