What are the seven-year historical hazard rates that would be calculated from Table 24.1 for companies with different credit ratings? Assuming a 40% recovery rate, what credit spread is necessary to compensate for these hazard rates?

Table 24.1

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Table 24.1 Average cumulative default rates (%), 1981-2019 (Source: S&P Global Ratings Research and S&P Global Market Intelligence's Credit Pro). Rating Time (years) 1 2 3 4 5 7 10 15 AAA 0.00 0.03 0.13 0.24 0.35 0.51 0.70 0.91 AA 0.02 0.06 0.12 0.21 0.31 0.50 0.72 1.02 A 0.05 0.14 0.23 0.35 0.47 0.79 1.24 1.89 BBB 0.16 0.45 0.78 1.17 1.58 2.33 3.32 4.69 BB 0.61 1.92 3.48 5.05 6.52 9.01 11.78 14.67 B 3.33 7.71 11.55 14.58 16.93 20.36 23.74 27.12 CCC/C 27.08 36.64 41.41 44.10 46.19 48.26 50.38 52.59