6. During the recession in mid-2009, homebuilder KB Home had outstanding 7-year bonds with a yield to maturity of 8.8% and a BB rating. If corresponding risk-free rates were 2.7%, and the market risk premium was 4.8%, estimate the expected return of KB Home's debt using two different methods. How do your results compare? Note: the average loss rate for unsecured debt is about 60%. See annual default rates by debt rating here (table 1 on left) and average debt betas by rating and maturity here (table 2 on right).

a. Considering the probability of default, the expected return of the bond is: _____%. (Round to two decimal places.)

different methods. How do your results compare? Note: the average loss rate for unsecured debt is about 60%. See annual default rates by debt rating here and average debt betas by rating and maturity here Considering the probability of default, the expected return of the bond is b. (Round to two decimal places.) Data table Data table (Click on the following icon in order to copy its contents into a spreadsheet.)