A BobCo bond with a face value of $100 matures in one year. There is a 50% chance that BobCo will go bankrupt in the next year, in which case the holder of the bond receives $90. If the current market price of the BobCo bond is $87, what is the (risk-free) market interest rate in percent?

A BobCo bond with a face value of $100 matures in one year. There is a 50% chance that BobCo will go bankrupt in the next year, in which case the holder of the bond receives $90. If the current market price of the BobCo bond is $87, what is the (risk-free) market interest rate in percent?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter6: Fixed-income Securities: Characteristics And Valuation

Section: Chapter Questions

Problem 8P

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