Assume that the cumulative default probability (calculated from historical data) for a given

bond is 3% and that the credit spread 120 bps (over the risk free rate). Assume also that the

recovery rate for the bond is 45%. What is the Expected Excess Return implied by these data?

Briey explain how it is computed .

Answer rating: 100% (QA)

The Expected Excess Return can be computed by multiplying the credit spread by the probability ... View the full answer