Reference no: EM133001005
Risky Business' outstanding debt is 6% bonds, paying interest annually and maturing one year from today. The bonds currently sell for $556 per $1,000 par value. The company is experiencing severe financial difficulties and analysts predict that there is a 63% probability that the company will go bankrupt within the year. If bankruptcy occurs, bondholders are predicted to receive only 30% of the promised cash flow (principal plus coupon).
a. What is the current promised yield to maturity (assuming that bondholders receive all promised)? (Round your answer to 1 decimal place. Use minus sign to enter negative values, if any.)
Current yield to maturity %
b. What is the current yield to maturity assuming that default occurs? (Round your answer to 1 decimal place. Use minus sign to enter negative values, if any.)
Current yield to maturity %
c. What is the current expected yield to maturity? (Round your answer to 2 decimal places. Use minus sign to enter negative values, if any.)
Current yield to maturity %
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