3. Presume you purchase a bond for Apple Corporation that a 95% chance of paying at the end and a 5% chance of default. You purchase the $300 bond for $285. What is the expected value, what is the yield to maturity, and what is the risk premium give the rate risk free at 2.5%?

3. Presume you purchase a bond for Apple Corporation that a 95% chance of paying at the end and a 5% chance of default. You purchase the $300 bond for $285. What is the expected value, what is the yield to maturity, and what is the risk premium give the rate risk free at 2.5%?

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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3. Presume you purchase a bond for Apple Corporation
that a 95% chance of paying at the end and a 5% chance
of default. You purchase the $300 bond for $285. What is
the expected value, what is the yield to maturity, and what
is the risk premium give the rate risk free at 2.5%?

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