A risky bond promises to pay $1,000 at the end of the year. The bond has a risk neutral probability of default of 20%. If in default, the bondʹs residual payout will be $600. If the risk free rate is 4%, what is the yield to maturity on this bond?
A) 4.08 %
B) 6.92 %
C) 9.56 %
D) 13.13 %

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The Answer of A risky bond promises to pay $1,000 at the end of the year. The bond has a risk neutral probability of default of 20%. If in default, the bondʹs residual payout will be $600. If the risk free rate is 4%, what is the yield to maturity on this bond?
A) 4.08 %
B) 6.92 %
C) 9.56 %
D) 13.13 %

A Risky Bond Promises to Pay $1,000 at the End