Question: Consider a firm whose 1-year zero-coupon bonds currently yield 9.3%. The yield on 1-year zero-coupon Treasury bonds is 7.4%. Assume that when the firm defaults

Consider a firm whose 1-year zero-coupon bonds currently yield 9.3%. The yield on 1-year zero-coupon Treasury bonds is 7.4%. Assume that when the firm defaults bondholders expect to recover $0.58 on the dollar with probability 3/8 and $0.37 on the dollar with probability 5/8? Assume periodicity of 1.

What is this firms implied probability of default?

Express your answer in percent and round your answer to 2 decimal places. For example, if your answer is 0.09457, please write down 9.46 (without the percent sign).

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