An investor has 1350 to invest and his financial advisor rec

An investor has $1,350 to invest and his financial advisor recomends two types of junk bonds. The A bonds have 8% annual yield with a default rate of 1%. the B bonds have a 10% annual rate and a default rate of 5%

Which of the two bonds is better and why?

and should the investor select either bond?

Solution

return for bond A is 1350 * 1.08 * 0.99 = 1443.42
, and for bond B is 1350 * 1.10 * 0.95 = 1410.75
Bond A, reason is more profitable,