The risk-free rate is 2% per year and a corporate bond yields 4% per year. Assuming...

Transcribed Image Text:

The risk-free rate is 2% per year and a corporate bond yields 4% per year. Assuming a recovery rate of 40% on the corporate bond. 1) What is the approximate market implied one year probability of default of the corporate bond in a risk neutral world? (2 points) 2) Assuming 0.8% risk premium for a risk averse investor, what is the approximate market implied one year probability of default of the corporate bond? (2 points) The risk-free rate is 2% per year and a corporate bond yields 4% per year. Assuming a recovery rate of 40% on the corporate bond. 1) What is the approximate market implied one year probability of default of the corporate bond in a risk neutral world? (2 points) 2) Assuming 0.8% risk premium for a risk averse investor, what is the approximate market implied one year probability of default of the corporate bond? (2 points)

Answer rating: 100% (QA)

Step 11 Risk Free rate 2 Corporate Bond Yields 4 Recovery ... View the full answer