a.)What spread over AAA will it have to pay?

The yield dunley will have to pay is ____% (2 decimal places)

The spread is ____%(2decimal places)

b.) What is Dunleys AAA now?

The yield dunley will have to pay is ____% (2 decimal places)

The spread is ____%(2decimal places)

c.) redo part b assuming that the market risk premium and the beta of debt both increade by 20%, that is they equak 1.20 times their value in recessions.

The yield dunley will have to pay is ____% (2 decimal places)

The spread is ____%(2decimal places)

The Dunley Corp. plans to issue 5-year bonds. It believes the bonds will have a BBB rating. Suppose AAA bonds with the same maturity have a 4% yield. If the market risk premium is 4% using the data in the tables: a. Estimate the yield Dunley will have to pay, assuming an expected 53% loss rate in the event of default during average economic times. What spread over AAA bonds will it have to pay? b. Estimate the yield Dunley would have to pay if it were a recession, assuming the expected loss rate is 81% at that time but the beta of debt and market risk premium are the same as in average economic times. What is Dunley's spread over AAA now? c. In fact, one might expect risk premia and betas to increase in recessions. Redo part (b) assuming that the market risk premium and the beta of debt both increase by 20%, that is they equal 1.20 times their value in recessions a. Estimate the yield Dunley will have to pay, assuming an expected 53% loss rate in the event of default during average economic times. What spread over AAA bonds will it have to pay? The yield Dunley will have to pay is \%. (Round to two decimal places.) Source: "Corporate vetaults and Recovery Rates, 1920-2011," Moody's Global Credit Policy, February 2012. (Click on the following icon in order to copy its contents into a spreadsheet)