A corporate bond has one-year maturity. The bond pays an interest of $50 and principal of
$1,000 at the time of maturity. If the bond has 10% probability of default and payment under default is $400, and an investor buys the bond for $907.14. Calculate the promised yield on the bond.
A) 6.6%
B) 15.75%
C) 5.0%
D) None of the given values
Correct Answer:
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