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1.6 The following information is about the spot rates on Treasury securities and BBB corporate bond: Spot 1 Year Spot 2 Year Spot 3 Year

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1.6 The following information is about the spot rates on Treasury securities and BBB corporate bond: Spot 1 Year Spot 2 Year Spot 3 Year Treasury 4.75% 5.5% BBB Corporate Debt 7.5% 9.15% 10.5% Question: What is the cumulative default probability over the two year period for the one-year BBB corporate bond? 3% 8.96% 8.7.91% oc 10.25% OD 9.47% OE 9.92%

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