Question 1 through Question 4 are based on the information on current spot and forward term structures (assume the corporate debt pays interest annually) in Table 1:

Using the term structure of default probabilities in Table 1, what is the implied default probability for BBB corporate debt during the first year?

Question 2 options:

A)

97.63%

B)

2.38%

C)

3.94%

D)

98.24%

E)

4.52%