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Compute the Promised Yield to Maturity and Expected Return to Maturity

Question 8

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Compute the promised yield to maturity and expected return to maturity on a default-risky 3-year pure-discount corporate bond that has a current price of $543.With a probability of 0.6, the issuer will repay the principal of $1,000 at maturity.However, the probability is 0.4 that the issuer will default, in which case bondholders will receive only $200 per bond.
 Promised  Yield  Exp. Ret.  to Mat.  a. 22.57%13.06% b. 22.57%7.79% c. 13.06%13.06% d. 13.06%7.79%\begin{array} { c c r } & \begin{array} { c } \text { Promised } \\\text { Yield }\end{array} & \begin{array} { r } \text { Exp. Ret. } \\\text { to Mat. }\end{array} \\\text { a. } & 22.57 \% & 13.06 \% \\\text { b. } & 22.57 \% & 7.79 \% \\\text { c. } & 13.06 \% & 13.06 \% \\\text { d. } & 13.06 \% & 7.79 \%\end{array}

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