Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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You estimate that a 1-year zero-coupon bond (face value = $1000) has a probability of default
equal to 26%. In the event of default, you estimate the bond issuer will bay $563. The current
risk-free rate is 5%. How much should you pay for this bond?
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Transcribed Image Text:You estimate that a 1-year zero-coupon bond (face value = $1000) has a probability of default equal to 26%. In the event of default, you estimate the bond issuer will bay $563. The current risk-free rate is 5%. How much should you pay for this bond?
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