5. The bond equivalent yields for U.S. Treasury and A-rated corporate bonds with maturities of 93 and 175 days are given below:

85 Days 190 Days

U.S. Treasury 7.07% 7.11%

A-rated corporate 7.42% 7.66%

Spread 0.35% 0.55%

a. What are the implied forward rates for both an 105-day Treasury and an 105-day A-rated bond beginning in 85 days? Use daily compounding on a 365-day year basis.

b. What is the implied probability of default on A-rated bonds over the next 85 days? Over 190 days?

c. What is the implied default probability on an 105-day A-rated bond to be issued in 85 days?