Question: *** PLEASE USE IRR TO SOLVE PART B *** 7 Problem 23-1 Expected yield 10 points You own a bond with an annual coupon rate

*** PLEASE USE IRR TO SOLVE PART B *** 7 Problem 23-1*** PLEASE USE IRR TO SOLVE PART B ***

7 Problem 23-1 Expected yield 10 points You own a bond with an annual coupon rate of 5% maturing in two years and priced at 86%. Suppose that there is a 8% chance that at maturity the bond will default and you will receive only 44% of the promised payment. Assume a face value of $1,000. a. What is the bond's promised yield to maturity? (Enter your answer as a percent rounded to 2 decimal places.) Answer is complete and correct. Promised yield 13.44 % b. What is its expected yield (i.e., the possible yields weighted by their probabilities)? (Enter your answer as a percent rounded to 2 decimal places.) Answer is complete but not entirely correct. Expected yield 11.06 X %

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