Question: Consider a 1-year maturity zero-coupon bond with a face value of $1,000,000 and a 0% recovery rate issued by Company A. The bond is currently

Consider a 1-year maturity zero-coupon bond with a face value of $1,000,000 and a 0% recovery rate issued by Company A. The bond is currently trading at 80% of face value. Assuming the excess spread only captures credit risk and that the risk-free rate is 5% per annum, the risk-neutral 1-year probability of default on Company A is closest to which of the following?

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