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
Related questions
Question
Transcribed Image Text:Today is 1 July, 2022, Georg plans to purchase a corporate
bond with a coupon rate of j₂ = 6.09% p.a. and a face value
of $100. This corporate bond matures at par. Its maturity
date is 1 January, 2025. The yield rate is assumed to be j2 =
4% p.a. Assume that this corporate bond has a 5% chance
of default in any six-month period during its term. Assume,
also, that, if default occurs, Georg will receive no further
payments at all. Calculate Georg's purchase price. Round
your answer to three decimal places.
a.
$105.413
O b. $79.625
O c. $104.208
O d. $82.447
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