The spread between the yield on a fiveyear bond issued by a company and the yield on

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The spread between the yield on a five‐year bond issued by a company and the yield on a similar risk‐free bond is 80 basis points. Assuming a recovery rate of 40%, estimate the implied average hazard rate per year over the five‐year period. If the spread is 70 basis points for a three‐year bond, what do your results indicate about the implied average hazard rate in years 4 and 5?

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