Consider the following information regarding corporate bonds:

Rating	AAA	AA	A	BBB	BB	B	CCC
Average Default Rate	0.0%	0.0%	0.2%	0.4%	2.1%	5.2%	9.9%
Recession Default Rate	0.0%	1.0%	3.0%	3.0%	8.0%	16.0%	43.0%
Average Beta	0.05	0.05	0.05	1.0	0.17	0.26	0.31

Wyatt Oil has a bond issue outstanding with seven years to maturity, a yield to maturity of 7.0%, and a BBB rating. The bondholders expected loss rate in the event of default is 70%. Assuming a normal economy the expected return on Wyatt Oil's debt is

Answer rating: 100% (QA)

Expected return on Wyatt Oils debt Yield to Maturity of Wyatts bond Average Defau... View the full answer