According to Standard & Poor's, the probability that a bond issued with an A rating will...

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According to Standard & Poor's, the probability that a bond issued with an "A" rating will default DYRING ANY GIVEN PAYMENT PERIOD is 2.3% i.e. the probability that a bond issued with an "A" rating will never default is (1 -2.3%). Suppose that the average maturity of the bonds (when issued) is 7 years, and that default can only happen once per semester, at the time of coupon payments. Furthermore, assume that the default probability is constant throughout the bond's life. What is the default probability PER SEMESTER consistent with these numbers and assumptions? According to Standard & Poor's, the probability that a bond issued with an "A" rating will default DYRING ANY GIVEN PAYMENT PERIOD is 2.3% i.e. the probability that a bond issued with an "A" rating will never default is (1 -2.3%). Suppose that the average maturity of the bonds (when issued) is 7 years, and that default can only happen once per semester, at the time of coupon payments. Furthermore, assume that the default probability is constant throughout the bond's life. What is the default probability PER SEMESTER consistent with these numbers and assumptions?

Answer rating: 100% (QA)

Based on the information provided if the probability of default during any given payment ... View the full answer