Compute the Promised Yield to Maturity and Expected Return to Maturity

question 18

Short Answer

Compute the promised yield to maturity and expected return to maturity on a default-risky 5-year pure-discount corporate bond that has a current price of $541.With a probability of 0.7, the issuer will repay the principal of $1,000 at maturity.However, the probability is 0.3 that the issuer will default, in which case bondholders will receive only $500 per bond.
$\begin{array}{l}&\text { Promised } & \text { Exp. Ret. }\\& \text { Yield } & \text { to Mat. } \\\text { a. } & 17.63 \% & 13.06 \% \\\text { b. } & 17.63 \% & 9.46 \% \\\text { c. } & 13.06 \% & 9.46 \% \\\text { d. } & 13.06 \% & 3.30 \%\end{array}$

---

Definitions:

African Americans

A term referring to citizens or residents of the United States who have total or partial ancestry from any of the black racial groups of Africa.

Inadequate Medical Treatment

Medical care that falls below the accepted standard, often due to insufficient access to healthcare resources, professionals, or knowledge.

Health Literacy

The ability to obtain, read, understand, and use healthcare information to make appropriate health decisions and follow instructions for treatment.

Infant Mortality

The death of young children under the age of 1 year, often measured as the number of deaths per 1,000 live births.