1. Assume that i₁ = 11% and i₂ = 12%, and that k₁ = 14.50% and k₂ = 16.50%. What is the expected probability of repayment on the one-year corporate bonds in one year's time (round to two decimals)?

2. Assume a $500 000 loan has a duration of 2.5 years. The current interest rate level is 10% and a sudden change in the credit premium of 1% is expected. Further assume that the one-year income on the loan is $2500. What is the loan's RAROC (round to two decimals)?

3. Assume that B = $200 000, r = 1 year, i = 7%, d = 0.9, N(h₁) = 0.174120 and N(h₂) = 0.793323. Using Moody's KMV Credit Monitor model, what is the current market value of the loan (round to two decimals)?