Finance Basics
A local radio station issues a one-year zero-coupon bond. The face value is 1000. You believe that the probability of bankruptcy is 8%. The appropriate discount rate (taking into account the risk of the investment) is 1.5%.
I) What is the price of the bond?
II) What is the YTM of the bond?
III) If the 1-year risk-free rate is 1%. what is the yield spread?
