What is the price of a 2-year bond if the coupon is 9% and the...
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What is the price of a 2-year bond if the coupon is 9% and the yield is 6.2%? Now assume that there is a 5% chance that the company which issued the bond will go bankrupt in 2 years. If they go bankrupt, you will receive only 50 cents for every dollar of principal or coupon in the second year. What is the price assuming a 6.2% discount rate? What risk-less yield-to-maturity does that price imply?
You forecast that your mail-order business can bring in $20,000/year starting in 8 years and going on forever. Assuming a 13% discount rate, how much is this worth?
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