Short term inc has issued zero-coupon bonds that mature in, Ask an Expert

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Short Term Inc. has issued zero-coupon bonds that mature in one year. The returns from holding these bonds have a beta of 0.25. There is a chance of 70% that the bonds will pay full value, and a chance of 30% that they will only be worth 60 cents for each dollar of face value. Assume that the CAPM holds, that the riskless rate is 5% and that the expected return on the market is 15%.

1. What is the current price of the bonds, per $100 face value?

2. What is the yield to maturity on the bonds?

3. What is the expected return on the bonds?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91779101

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