Suppose that a corporate bond has one year to maturity. The bond has a par value of $1,000 and its annual coupon rate is 8%. After evaluating the risk, an investor concludes that the bond has a 15 percent probability of default and payment under default is $500. The current price of the bond is $900. If the investor decides to buy the bond now, what is the expected payment from the bond?

a. $900 b. $1,080 c. $993 d. $1,000

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