Answer Happy

The Loughran Corporation has issued zero-coupon corporate bonds with a five-year maturity. Investors believe there is a 40% chance that Loughran will default on these bonds. If Loughran does default, investors expect to receive 25% of their promised payoff at maturity (e.g., $0.25 cents per dollar they are promised). If investors require a 7.0% expected return on their investment in these bonds, which of the following statements most accurately describes the price (per $100 face value) and current YTM of these bonds? O A. This bond is priced at $49.91 per $100 face value with a YTM of 7.0%. OB. This bond is priced at $71.30 per $100 face value with a YTM of 7.0%. OC. This bond is priced at $42.78 per $100 face value with a YTM of 18.5% OD. This bond is priced at $49.91 per $100 face value with a YTM of 14.9%. O E. This bond is priced at $70.00 per $100 face value with a YTM of 7.4%.