1. Suppose a firm with a value of $ 60 million has a bond outstanding with a face value of $50 million that matures in 2 yearsthe current interest rate is 6% and the volatility of the firm is 25\% what is the probability that the firm will default on its debt if the expected return on the firm 30 % ?what is the expected loss given default ?

2. Suppose a firm with a value of 5100 million has a bond outstanding with a face value of million that matures in 8 yearsthe current interest rate is and the volatility the finis 20 what is the probability that the firm will default on its debt if the expected return on the im is 10% what is the probability of default?

3. We wish to compare a 10-year U.S. 9 Treasury strip and a 10-year zero issued by (IBM)which is rated A by S&P The respective yields are 6% and 7%, using semiannual compounding. Assuming that the recovery rate is 45% of the face value, ?what is the probability of default

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