Expected yieldyou own a bond with an annual coupon rate of, Ask an Expert

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Expected yield

You own a bond with an annual coupon rate of 8% maturing in two years and priced at 85%. Suppose the probability is 11% that at maturity the bond will default and you will receive only 45% of the promised payment. Assume a face value of $1,000.

a. What is the bond’s promised yield to maturity? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Promised yield %

b. What is its expected yield? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)

Expected yield

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Financial Management, Finance

Category:- Financial Management
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