Someone offered you to sell a 2-year, zero coupon bond at the price of $900....
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Accounting
Someone offered you to sell a 2-year, zero coupon bond at the price of $900.
1) If the market rate of return for similar bonds is 8%, would you buy the bond at the offered price?
2) Now there is a news that the bond issuing company has run into financial trouble recently and there is 10% chance that the company will default on its debt/bond payments. Given this new information, how much would you pay for this bond? The market rate of return for similar bonds is 10%
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