Question: In mid-2009, Rite Aid had CCC-rated, 10-year bonds outstanding with a yield to maturity of 17 3%. At the time, similar maturity Treasuries had a

In mid-2009, Rite Aid had CCC-rated, 10-year bonds outstanding with a yield to maturity of 17 3%. At the time, similar maturity Treasuries had a yield of 5%. Suppose the market risk premium is 6% and you believe Rite Aid's bonds have a beta of 0 31. The expected loss rate of these bonds in the event of default is 57% a. What annual probability of default would be consistent with the yield to matunty of these bonds in mid-2009? b. In mid-2015, Rite Aid's bonds had a yield of 7,3%, while similar maturity Treasuries had a yield of 1.6% What probability of default would you estimate now? a. What annual probability of default would be consistent with the yield to matunity of these bonds in mid-2009? The required return for this investment is % (Round to two decimal places.) The annual probability of default is [%. (Round to two decimal places) b. In mid 2015, Rite Aid's bonds had a yield of 7.3%, while similar maturity Treasures had a yield of 1.6% What probability of default would you estimate now? The probability of default will be % (Round to two decimal places.)

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