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[Ch 7] JCNickel Corporation has issued zero-coupon corporate bonds with 7 years to maturity
and a face value of $2,000. Investors believe there is a 30% chance that JCNickel will default on
these bonds. If JCNickel does default, investors expect to receive only 40% of the promised
payoff at maturity. If investors' expected required return is 9.200%, what is the default risk
premium on these bonds? (to nearest 0.01% )

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  • 1. [Ch 7] JCNickel Corporation has issued zero-coupon corporate bonds with 7 years to maturity and a face value of $2,000. Investors believe there is a 30% chance that JCNickel will default on these bonds. If JCNickel does default, investors expect to receive only 40% of the promised payoff at maturity. If investors' expected required return is 9.200%, what is the default risk premium on these bonds? (to nearest 0.01% )