A Zero-Coupon Bond Has a Beta of 0

question 29

Multiple Choice

A zero-coupon bond has a beta of 0.15 and promises to pay $5,000 next year with a probability of 96%, $1,000 with a probability of 2%, and there is a 2% probability of total default. One-year Treasury securities are yielding 4%, and the expected return on the market is 10%.
-Refer to the information above. What is the promised rate of return on this bond investment? Round your answer to the nearest tenth of a percent.

• A)8.8%
• B)6.0%
• C)9.3%
• D)5.4%

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