bond's current price is $650. The bond has a face value of $1000, a coupon rate of 5%, maturity in 1.5 years, and it pays coupons semi-annually. Investors expect that the firm will be able to meet its coupon obligations, but they calculate the probability of default on the face value at maturity to be 30%. What is the bond's annualized expected yield?
bond's current price is $650. The bond has a face value of $1000, a coupon rate of 5%, maturity in 1.5 years, and it pays coupons semi-annually. Investors expect that the firm will be able to meet its coupon obligations, but they calculate the probability of default on the face value at maturity to be 30%. What is the bond's annualized expected yield?
Chapter6: Fixed-income Securities: Characteristics And Valuation
Section: Chapter Questions
Problem 4P
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A bond's current price is $650. The bond has a face value of $1000, a coupon rate of 5%, maturity in 1.5 years, and it pays coupons semi-annually. Investors expect that the firm will be able to meet its coupon obligations, but they calculate the probability of default on the face value at maturity to be 30%.
What is the bond's annualized expected yield?
20.03%
44.38%
37.61%
12.51%
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