Calculate the price the investora

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Several years ago, Sinker Ltd issued zero-coupon bonds with $1,000 face value. Now, with seven years left to maturity on the bonds, the company is experiencing financial difficulties. Investors think that there is a 30% chance that the company will default on these bonds. If the company defaults, investors expect to receive only 25% of the face value at maturity.

a) If an investor were to purchase the bond today. Calculate the price the investor is willing to pay for this bond assuming that investors demand a 9% expected return on their investment in these bonds.

b) Find the yield to maturity on these bonds.

Reference no: EM133253384

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