Question: = AG4 A x fx B D E F 1 Suppose that B-rated bonds have a one-year default probability of 15%. 2 When defaults happen,

AG4 A x fx B D E F 1 Suppose that B-rated

AG4 A x fx B D E F 1 Suppose that B-rated bonds have a one-year default probability of 15%. 2 When defaults happen, the recovery race is 80%. 3 The yield on a one-year Tremury bond is 4%. 4 5 Calculate the minimum yield investors should demand on a B-rated band. 5 7 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 2B 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 G H . K L M P Q R 5 T U V W x Y AA AB

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