Compute of bonds yield to maturity and the firm is in, Ask an Expert

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Compute of bond's yield to maturity

A zero-coupon bond with a par value of $1,000 matures in 5 years. The firm is in financial distress. There is a 30% chance that the firm will not be able to repay the principle. That is, there is a 30% change that the principle repayment will be zero and a 70% chance that the principle repayment will be the full $1,000. If the price of the bond is $500, what is the bond's expected yield to maturity?

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Basic Finance, Finance

Category:- Basic Finance
Reference No.:- M9160474

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