A company has issued three- and five-year bonds, each of which has a coupon of 4% per annum payable semiannually. The yields on the bonds (expressed with continuous compounding are 4.5% and 4.75%, respectively. Risk-free interest rates are 3.5% with continuous compounding for all maturities. The recovery rate is 40%. Defaults can take place halfway through each year. The unconditional risk-neutral default rates per year are Q1 for years 1 to and Q2 for years 4 and 5. Estimate Q1 and Q2.

AppendixLO1