A zero-coupon bond has a beta of 0.3 and promises to pay $1000 next year with a probability of 95%. If the bond defaults, it will pay nothing. One -year Treasury securities are yielding 2%, and the equity premium is 5%. What is the time premium for this bond investment? O 4.8% O 2.0% O 1.9% O 5.0%

A zero-coupon bond has a beta of 0.3 and promises to pay $1000 next year with a probability of 95%. If the bond defaults, it will pay nothing. One -year Treasury securities are yielding 2%, and the equity premium is 5%. What is the time premium for this bond investment? O 4.8% O 2.0% O 1.9% O 5.0%

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 8MC: Suppose a 10-year, 10% semiannual coupon bond with a par value of 1,000 is currently selling for...

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Question

am. 236.

A zero-coupon bond has a beta of 0.3 and
promises to pay $1000 next year with a
probability of 95%. If the bond defaults, it will
pay nothing. One -year Treasury securities are
yielding 2%, and the equity premium is 5%.
What is the time premium for this bond
investment?
O 4.8%
O 2.0%
O 1.9%
O 5.0%

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