Grummon corporation has issued zero-coupon corporate bonds

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Reference no: EM131498324

Grummon Corporation has issued zero-coupon corporate bonds with a five-year maturity (assume $ 100 face value bond). Investors believe there is a 20% chance that Grummon will default on these bonds. If Grummon does default, investors expect to receive only 50 cents per dollar they are owed. If investors require a 6% expected return on their investment in these bonds, what will be the

a. price of these bonds?

b. yield to maturity on these bonds?

Note: Assume annual compounding.

a. What will be the price of these bonds?

The price of these bonds is $ (Round to the nearest cent.)

b. What will be the yield to maturity on these bonds, assuming the default does not materialize?

The yield to maturity on these bonds is %. (Round to two decimal places.)

Reference no: EM131498324

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