# Question

Suppose the firm issues a single zero-coupon bond with maturity value $100.

a. Compute the yield, probability of default, and expected loss given default for times to maturity of 1, 2, 3, 4, 5, 10, and 20 years.

b. For each time to maturity compute the approximation for the yield:

How accurate is the approximation?

a. Compute the yield, probability of default, and expected loss given default for times to maturity of 1, 2, 3, 4, 5, 10, and 20 years.

b. For each time to maturity compute the approximation for the yield:

How accurate is the approximation?

## Answer to relevant Questions

Consider the widget exchange. Suppose that each widget contract has a market value of $0 and a notional value of $100. There are three traders, A, B, and C. Over one day, the following trades occur: A long, B short, 5 ...Suppose a stock pays a quarterly dividend of $3. You plan to hold a short position in the stock across the dividend ex-date. What is your obligation on that date? If you are a taxable investor, what would you guess is the ...Using the same information as the previous question, draw payoff and profit diagrams for a short position in the stock. Verify that profit is 0 at a price in 1 year of $55. Suppose the firm issues a single zero-coupon bond with time to maturity 3 years and maturity value $110. a. Compute the price, yield to maturity, default probability, and expected recovery (E [BT| Default]). b. Verify that ...Repeat the previous problem, except that the time to maturity can be 1, 2, 3, 4, 5, 10, or 20 years. How does the bond yield change with time to maturity?Post your question

0