Paying attention only to Implied Default Probabilities, estimate the change of rating of a considered risk-free bond that starts to trade with 100 basis points over risk-free debt. So it will be an AAA bond that at some point changes its credit risk and therefore its rating.

If Recovery is 40%, what should be the new rating?

Answer rating: 100% (QA)

To estimate the change in the rating of a riskfree bond that start trading at 100 basis points over ... View the full answer