Your boss asks you to determine the fair market value of a bond. The following information is available about this bond: the bond contract specifies only one payment of $440 million in one year. The firm defaults on this contract with 5% probability, but you do not have information on the payment bondholders will receive in the event of default. The yield to maturity on comparable bonds trading in the market is 10%, and the firms cost of debt r_d (expected return) is 7%. The best answer to your boss is that the fair value of the bond is:

	a.	More than 432 million
	b.	432 million
	c.	More than 412 million and less than 432 million
	d.	412 million
	e.	More than 400 million and less than 412 million
	f.	400 million
	g.	Less than 400 million
	h.	There is not enough information to determine the fair market value, since we not not know what the actual payment will be
	i.	None of the above