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2- Using the table below, answer the following questions: a) What is the unconditional probability of default in year 3 for a A-rated bond? b)
2- Using the table below, answer the following questions: a) What is the unconditional probability of default in year 3 for a A-rated bond? b) What is the probability that the A rated bond will survive till the end of year 2? c) What is the hazard rate or, default intensity for a A-rated bond during the 3rd year? Years 1 2 3 4 5 6 7 Aaa 0.00 0.00 0.00 0.04 0.12 0.29 0.62 Aa 0.02 0.04 0.08 0.16 0.28 0.55 0.76 0.03 0.10 0.23 0.38 0.54 0.91 1.59 0.27 0.60 1.03 1.62 2.16 3.24 5.10 1.75 3.87 6.00 8.59 11.17 15.44 21.01 8.95 15.56 20.65 26.66 31.99 40.79 50.02 27.75 41.20 48.02 55.56 60.83 69.36 77.91 Rating A Baa Ba B Caa
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