Consider a one year 7 coupon bond with a par value of 1000, Ask an Expert

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Consider a one year, 7% coupon bond with a par value of $1000 issued by a private corporation. The one year risk-free rate is 9%. The corporation has hit on hard times and the consensus is that there is a 30% probability that it will default on its bonds. If an investor were willing to pay $695 for the bond, is that investor risk neutral, risk lover, or risk averse? Why?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91619757

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