The TrunkLine Company Debtholders Are Promised Payments of $35 If

Multiple Choice

The TrunkLine Company debtholders are promised payments of $35 if the firm does well, but will receive only $20 if the firm does poorly. If the bonds are selling at a price of $25, the promised return to the bondholders is approximately:

A) 2.90%.
B) 40.00%.
C) 27.30%.
D) 16.86%.
E) 100.00%.