Suppose right after you purchase the bond in the problem 21, a new variant of Covid-19 begins to spread over the country and the default probability of the firm increases sharply. Select the yield to maturity from the two possibilities: either 2% or 10% and calculate the gain or loss on your bond. 

 

The following table summarizes prices of various default-free zero-coupon bonds (expressed as a percentage of face value):

 

Bond                                          A                   B                          C                              D

Maturity (years)                        1                     2                          3                              4

Price (per $100 face value)  96.62            80.62                     81.02                       80.50

 

For bond A, it will mature in 1 year and has a current bond price of $96.62

For bond B, it will mature in 2 years and has a current bond prince of $80.57

Assume the YTM for each bond doesn't change over time. After two years, What is the price for bond D? 

Answer rating: 100% (QA)

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