Taggart Transcontinental has issued at par a zero-coupon bond with a ten-year maturity.Investors believe there is a 10% chance that Taggart Transcontinental will default on these bonds.If they do default,investors expect to receive only 50 cents per dollar they are owed.If investors require an 8% return on their investment in these bonds,then the yield to maturity on these bonds will be closest to (assume annual compounding):

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The yield to maturity on these bonds is closest to 8.56%. This is because investors require an 8% return on their investment in these bonds, and there is a 10% chance that Taggart Transcontinental will default on these bonds. If they do default, investors expect to receive only 50 cents per dollar they are owed. This means that the expected return on these bonds is 8% * 0.9 + 0.5 * 0.1 = 8.56%.

Taggart Transcontinental Has Issued at Par a Zero-Coupon Bond with a Ten-Year