30. From the Treasury strip yield curve, the current required yields on one- and

two-year Treasuries are i1 = 4.65 percent and i2 = 5.50 percent, respectively.

Further, the current yield curve indicates that appropriate one-year discount

bonds are yielding k1 = 8.50 percent, and two-year bonds are yielding

k2 = 10.25 percent.

a. Calculate the one-year forward rate on the Treasuries and the corporate bond.

b. Using the current and forward one-year rates, calculate the marginal probability

of repayment on the corporate bond in years 1 and 2, respectively.

c. Calculate the cumulative probability of default on the corporate bond over

the next two years.