A firm has a single issue of a zero coupon debt that promises to pay $90 in 4 years,and the A₀ = $100,r = 4%,σ = 25%,and δ = 0.If the asset has a 2% chance of total default,what is the yield on the bond?
A) 8.32%
B) 12.33%
C) 24.36%
D) 36.85%
Correct Answer:
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