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You Are Considering Purchasing a 10-Year $10,000 Par Value Bond

question 14

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You are considering purchasing a 10-year $10,000 par value bond that pays semi-annual coupons at j2 = 10%.The probability the nth coupon will be defaulted,given that the previous (n - 1) coupons were paid,is 5% for each coupon during the first 5-years and 10% for each coupon for the last 5-years.What price should you pay for the bond if the desired yield is j2 = 8%?

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