The airline industry is capital intensive and often funded with debt. Consider a two - year coupon bond issued by an airline with a face value of $1,000, a coupon rate of 3%, an annual default probability of 5%, and a risk-free interest rate of 3% per year. Show work for all of the questions?
Use a binomial tree to value the bond assuming no recovery. The value (price, expected present value, etc.) of the bond is ___