Question: This is Question (exercise) 5 from Chapter 23 in the book Financial Modeling by Simon Benninga 4th edition. An Underwriter issues a new 7-year C-rated

This is Question (exercise) 5 from Chapter 23 in the book Financial Modeling by Simon Benninga 4th edition.

An Underwriter issues a new 7-year C-rated bond at par. The anticipated recovery rate in default of the bond is expected to be 55%. What should be the coupon rate on the bond so that its expected return is 9%? Assume the transition matrix of exercise 2.(I tried to copy it bellow, hope it helps)

1 0 0 0 0

0.06 0.90 0.03 0.01 0

0.02 0.05 0.88 0.05 0

0 0 0 0 1

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