A risky bond promises to pay $3,000 at the end of two years. The bond has a risk neutral probability of default of 10%. If in default, the bondʹs residual payout will be $2,500. If the risk free rate is 5%, what is the yield to maturity on this bond?
A) 5.00 %
B) 6.01 %
C) 7.09 %
D) 8.14 %
Correct Answer:
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