How do determine the market value of a bond

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Problem 1: Your boss asks you to determine the market value of a bond. The following information is available about this bond: the bond contract specifies only one payment of $200 million in one year. The firm defaults on this contract with 7% probability. In the event of default, the firm will not pay anything to bond holders. The firm's cost of debt rd (expected return on debt) is 12%. What is the market value of the bond?

Reference no: EM132995754

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