Corporate finance:
A company has an outstanding zero-coupon bond with face value $10,000,000 and maturity 2 years. If the economic situation in the next two years is good the value of the company's assets wili grów at an annual rate of I0% while if the situation is bad the assets annual growth will be -5%. The two situations are equally likely to happen. The current value of the firm's assets is $10,500,000. The bond bears no systematic risk and the risk free return is 2.89%.
What is the market price of the bond?