A Bond Has an Expected Yield-To-Maturity of 10% and a 5

question 58

Multiple Choice

A bond has an expected yield-to-maturity of 10% and a 5% probability of default. If the bond defaults, the bondholder should receive 90% of the market value. If fairly priced, the bond should have a promised yield-to-maturity of

• A) 11.1%.
• B) 10%.
• C) 9.4%.
• D) 10.3%.

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Definitions:

Price Elasticity

Refers to how sensitive the quantity demanded of a good is to a change in its price.

Demand Curve

A graph showing the relationship between the price of a good or service and the quantity demanded for a given period.

Price Elasticity

measures how sensitive the quantity demanded or supplied of a good is to a change in its price, indicating the responsiveness of market participants to price changes.

Price Elasticity

A measure of the responsiveness of the quantity demanded of a good to a change in its price.