Explore BrainMass

Explore BrainMass

    Promised Yield on the Bond Calculation

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Consider a one-year, $1000, zero-coupon bond issued. Assume that the bond payoffs are uncertain. There is a 50% chance that the bond will repay its face value in full and a 50% chance that the bond will default and you will receive $900. Thus, you would expect to receive $950. Because of the uncertainty, the discount rate is 5.9%. Calculate the promised yield on the bond.

    © BrainMass Inc. brainmass.com June 4, 2020, 3:07 am ad1c9bdddf

    Solution Summary

    This solution shows how to calculate the promised yield on a bond.