A corporate bond matures in one year.The bond promises interest of $50 and principal of $1,000 at maturity.Suppose the bond has a 10% probability of default and payment under default is $400.If an investor buys the bond for $890.19,calculate the promised yield on the bond.
A) 6.6%
B) 18.0%
C) 7.0%
D) 10.7%
Correct Answer:
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