5. Given an interest rate of 2.9% for a 10-year German bund and spread in case Exhibit 10 at the

end of 2010, what is the range of market-implied probabilities of default for Portugal, Greece,

Italy, Ireland, and Spain within next year? What do these implied probabilities tell you about the

markets view of the sovereign debt of these nations? (Hint: Use formula and explanations in

case Exhibit 8)

6. How sustainable is the Eurozone going forward? Will the system be able to find a solution to the

sovereign debt crisis? Should the EU have let overleveraged country members default?