Question: 9 Paying attention only to Implied Default Probabilities, estimate the change of rating of a considered risk-free bond that starts to trade with 100 basis

Paying attention only to Implied Default Probabilities, estimate the change of rating of a considered risk-free bond that starts to trade with 100 basis points over risk-free debt. So it will be an AAA bond that at some point changes its credit risk and therefore its rating.

If Recovery is 40%, what should be the new rating?

BB-

BB+

AA-

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