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You own a bond with an annual coupon rate of 5% maturing in two years and priced at 89%. Suppose that there is a 9%

You own a bond with an annual coupon rate of 5% maturing in two years and priced at 89%. Suppose that there is a 9% chance that at maturity the bond will default and you will receive only 42% of the promised payment. Assume a face value of $1000.

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

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