Is the disney bond necessarily a bad investment

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1. A bond will pay off $100 with probability 99% and will pay off nothing with probability 1%. The equivalent risk-free rate of return is 5%. What is an appropriate promised yield on this bond?

2. An L.A. Lakers bond promises an investment rate of return of 9%. Time-equivalent Treasuries offer 6%. Is this necessarily a good investment? Explain.

3. A Disney bond promises an investment rate of return of 7%. Time-equivalent Treasuries offer 7%. Is the Disney bond necessarily a bad investment? Explain.

Reference no: EM131235183

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