Question: Suppose the firm issues a single zero-coupon bond with time to maturity 3 years and maturity value $110. a. Compute the price, yield to maturity,

Suppose the firm issues a single zero-coupon bond with time to 3 years and value $110.
a. Compute the price, yield to default probability, and expected recovery (E[BT |Default]).
b. Verify that equation (27.5) holds.
Assume that a firm has assets of $100, with σ = 40%, α = 15%, and δ = 0. The risk-free rate is 8%.

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