Problem 24-1 Expected yield You own a bond with an annual coupon rate of 5% maturing in two years and priced at 87%. Suppose that there is a 10% chance that at maturity the bond will default and you will receive only 40% 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 (.e., the possible yields weighted by their probabilities)? Note: Enter your answers as a percent rounded to 2 decimal places. a. Promised yield b. Expected yield % %
Problem 24-1 Expected yield You own a bond with an annual coupon rate of 5% maturing in two years and priced at 87%. Suppose that there is a 10% chance that at maturity the bond will default and you will receive only 40% 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 (.e., the possible yields weighted by their probabilities)? Note: Enter your answers as a percent rounded to 2 decimal places. a. Promised yield b. Expected yield % %
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 12P: Bond Yields and Rates of Return A 10-year, 12% semiannual coupon bond with a par value of 1,000 may...
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