5. ) Assuming the two state model for credit risk, a risk-neutral default rate (2), OS IST, and a recovery rate of 8, write down the formula for the zero-coupon bond price B(0,7). [1 mark] (ii) Show that the credit spread y(T) on the bond is given by y(T) log (6 + (1 - $)e-629.7. (3 marks) Companies A and B both issue 4-year zero-coupon bonds. The credit spread on the bond issued by Company A is twice that issued by Company B. The recovery rate for the bond issued by Company A is 20% while that for the bond issued by Company B is 30%. The risk-neutral default intensity for Company Bis An() -0.01/(1+0).0 5:54. (iii) Assuming that the risk neutral default intensity of Company A is constant, com pute [6 marks 5. ) Assuming the two state model for credit risk, a risk-neutral default rate (2), OS IST, and a recovery rate of 8, write down the formula for the zero-coupon bond price B(0,7). [1 mark] (ii) Show that the credit spread y(T) on the bond is given by y(T) log (6 + (1 - $)e-629.7. (3 marks) Companies A and B both issue 4-year zero-coupon bonds. The credit spread on the bond issued by Company A is twice that issued by Company B. The recovery rate for the bond issued by Company A is 20% while that for the bond issued by Company B is 30%. The risk-neutral default intensity for Company Bis An() -0.01/(1+0).0 5:54. (iii) Assuming that the risk neutral default intensity of Company A is constant, com pute [6 marks