Answer questions 1 to 4 below using any data sources at your disposal (e.g. COMPUSTAT, CRSP, EDGAR, Yahoo Finance, etc.). To be able to answer some of the questions you may also need to make informed assumptions (e.g. about the market risk premium); if so please state them clearly in your answer sheet.

1) Using Mertons model estimate the current one-year default probability for Ford Motor Company (F).

2) Assuming default probabilities are constant through time, what is the probability that Ford will default sometime in the next five years?

3) Estimate the current one-year default probability for Ford Motor Company (F) using the CreditGrades model instead.

4) How different are structural and statistical models of default prediction? Reflect and compare the variables used as inputs in each of these models and the way in which those variables are linked to default probabilities. Keep your answer to no more than half a page.