Consider a target-maturity corporate bond ETF such as the iShares iBonds Dec 2020 Term Corporate ETF (NYSE Arca: IBDL). The yield-to-maturity of the ETF is approximately 1%. The fund holds 250+ bonds from different companies. Suppose one of those companies collapses before the maturity of their bond. How is it going to affect the amount that I will get when the ETF liquidates in December 2020?
Suppose 1% of the holdings of the ETF is in a company that will later be bankrupt. Will that mean that the actual YTM of my investment will turn out to be 0% (or worse if there are multiple collapses)?