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 Table 1. Term Structure of treasury bills/bonds and BBB corpoeste det Spot 1 Year Spot 2 Year (1-year maturity) forward 1 year Treasury 2.75 percent 5.25 percent X BBB Corporate Debt 5.25 percent 8.75 percent Y Question 1. Which one of the following is closest to the value of X and Y respectively? Hint: Based on the table, X denotes the implied forward rate on one-year maturity Treasuries to be delivered in one year, or in other words, the risk-free interest rate in the second year. Y denotes the implied forward rate on one-year BBB corporate debt to be delivered in one year. OA) X = 8.25%, Y = 10.25% B) X = 7.81%, Y = 12.37% OC) X = 7.81%, Y = 10.25% D) X = 8.25%, Y = 12.37% E) X = 6.23%, Y = 10.25% Using the term structure of default probabilities in Table 1, what is the implied default probability for BBB corporate debt during the first year? A) 98.24% B) 97.63% C) 3.94% D) 4.52% E) 2.38% Using the term structure of default probabilities, what is the implied default probability for BBB corporate debt during the second year? A) 4.06% B) 96.68% C) 5.25% D) 95.94% E) 3.33% What is the cumulative probability of repayment of BBB corporate debt over the next two years? A) 92.75% B) 6.33% C) 7.25% D) 99.9% E) 93.67%