The five-year risk-free rate of interest is 3.8%. A five-year, zero-coupon, $1,000 face value bond has a market price today of $800.
a. What is the yield to maturity on the corporate bond? (Careful: I am looking for the annualized rate and this is a five year period.)
b. What is the yield spread between this corporate bond and the risk free bond?
c. Can we estimate the beta risk of this corporate bond using the CAPM equation? (Same answer as above.)