Question: Using the transition matrix of the previous problem, assume a C-rated bond is selling at par on July 18, 2007. The bonds maturity is July

Using the transition matrix of the previous problem, assume a C-rated bond is selling at par on July 18, 2007.

The bond’s maturity is July 17, 2017; it has a coupon (paid annually on July 17) of 11%; and it has a recovery percentage of λ = 67%. What is the bond’s expected return?

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