XYZ corp. has issued $100 zero-coupon corporate bonds with 5-year maturity. Investors believe there is a 20% chance that XYZ corp. will default on these bonds. If it does default, investors expect to receive only 50 cents per dollar they are owed. If investors require a 6% expected return on their investment in these bonds, O 1) then the price will be 73.43 and YTM will be 10.85% O 2) then the price will be $67.25 and YTM will be 9.26% 3) then the price will be 93.43 and YTM will be 9.85% 4) None of the answers are correct 5) none of the answers are correct
XYZ corp. has issued $100 zero-coupon corporate bonds with 5-year maturity. Investors believe there is a 20% chance that XYZ corp. will default on these bonds. If it does default, investors expect to receive only 50 cents per dollar they are owed. If investors require a 6% expected return on their investment in these bonds, O 1) then the price will be 73.43 and YTM will be 10.85% O 2) then the price will be $67.25 and YTM will be 9.26% 3) then the price will be 93.43 and YTM will be 9.85% 4) None of the answers are correct 5) none of the answers are correct
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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Transcribed Image Text:XYZ corp. has issued $100 zero-coupon corporate bonds with 5-year maturity.
Investors believe there is a 20% chance that XYZ corp. will default on these bonds. If
it does default, investors expect to receive only 50 cents per dollar they are owed. If
investors require a 6% expected return on their investment in these bonds,
O 1) then the price will be 73.43 and YTM will be 10.85%
O 2) then the price will be $67.25 and YTM will be 9.26%
3) then the price will be 93.43 and YTM will be 9.85%
4) None of the answers are correct
5)
none of the answers are correct
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