A junk bond with a face value of $115 and a beta of 0.6 will...
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Finance
A junk bond with a face value of $115 and a beta of 0.6 will default with 30% probability. If it does, investors receive only 50% of what is due to them. The risk-free rate is 3.4% per year and the market risk premium is 8.2% per year. What is the promised rate of return of this bond?
Select one:
a. Promised return 29.44
b. Promised return 31.44
c. Promised return 27.44
d. Promised return 25.44
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