Use the Merton (1974) model to solve the approximate probability of default for a corporate debt issuer that has: current assets value = $24M, outstanding debt at maturity = $20M, there are 3 more months until debt maturity, risk free interest rate = 3.5%, assets volatility (standard deviation) = 45% per annum.

A. 43%

B. 33%

C. 63%

D. 23%

E. 53%

You assume the following information regarding the risk free interest rates and a debt-issuing (with a face value of $1,000) corporate respective interest rates:

Years	Risk Free Interest Rate	Corporate Interest Rate
1	4%	4.5%
2	4%	5.0%
3	4%	5.5%
4	4%	6.0%
5	4%	6.5%

What are the approximate cumulative expected default losses (in %) after 5 years?

A. 11.75%

B. 15.75%

C. 17.75%

D. 9.75%

E. 13.75%