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What is the yield to maturity of the bond

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Question - A local radio station issues a one-year zero-coupon bond. The face value is 1,000. You believe that the probability of bankruptcy is 8%. The appropriate discount rate (taking into account the risk of the investment) is 1.5%.

(i) What is the price of the bond?

(ii) What is the yield to maturity of the bond?

(iii) If the 1-year risk-free rate is 1%, what is the yield spread?

Reference no: EM132082834

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