Question 12 25 pts Consider a $1000 face value risk-free 1-year zero coupon with an interest rate of 4%. Consider a 1-year zero-coupon bond with the following risky cash flows: $1,000 with a probability of 90% Payoffs = 500 with a probability of 10% The discount rate of the above risky bond is 6%. Answer the following questions. 1. What is the yield to maturity of the bond? 2. Suppose there is a CDS completely hedging away the default risk of the risky bond. What is the price of the CDS? Upload Choose a File Question 12 25 pts Consider a $1000 face value risk-free 1-year zero coupon with an interest rate of 4%. Consider a 1-year zero-coupon bond with the following risky cash flows: $1,000 with a probability of 90% Payoffs = 500 with a probability of 10% The discount rate of the above risky bond is 6%. Answer the following questions. 1. What is the yield to maturity of the bond? 2. Suppose there is a CDS completely hedging away the default risk of the risky bond. What is the price of the CDS? Upload Choose a File