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9. Corporate bonds, issued by Tropicana plc, yield 5.3% and the risk-free rate of interest is 1.25%. If the recovery rate is 54%, what is
9. Corporate bonds, issued by Tropicana plc, yield 5.3% and the risk-free rate of interest is 1.25%. If the recovery rate is 54%, what is the default intensity or hazard rate for Tropicana plc? a) 0.075 b) 0.088043 c) 0.01863 d) 0.115217 e) 0.098148 10. The current risk-free rate of interest is 2 percent and stock prices move once each month according to a binomial process. Shares of Bellagio Inc go up by a factor u = 1.1 with a probability of 0.6, and down with a probability 0.4. What, according to the Cox, Ross and Rubinstein (1979) model, is the value of the risk-neutral probability measure appropriate for pricing a three-month call option written on Bellagio's stock? a) 0.4675 b) 0.4326 c) 0.6005 d) 0.4849 e) 0.5642
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