Question: The spread between the yield on a five-year bond issued by a company and the yield on a similar risk-free bond is 100 basis points.

The spread between the yield on a five-year bond issued by a company and the yield on a similar risk-free bond is 100 basis points. The spread is 50 basis points for a three-year bond. Assuming a recovery rate of 30%, what is the average hazard rate in years 4 to 5?

None of the other answers provided above is correct

3.00%

1.42%

0.71%

2.50%

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