Taggart Transcontinental has issued at par a zero-coupon bond with a ten-year maturity. Investors believe there is a 10% chance that Taggart Transcontinental will default on these bonds. If they do default, investors expect to receive only 50 cents per dollar they are owed. If investors require an 8% return on their investment in these bonds, then the yield to maturity on these bonds will be closest to (assume annual compounding):

A) 8.0%

B) 6.0%

C) 7.0%

D) 6.5%

Answer rating: 100% (QA)

A 80 Explanation Price Chance of No default Par value Chance o... View the full answer