Annual Default Rates by Debt Rating (1983-2011) Rating: AAA AA A BBB BB B CCC CC-C Default rate: Average 0.0% 0.1% 0.2% 0.5% 2.2% 5.5% 12.2% 14.1% In recessions 0.0% 1.0% 3.0% 3.0% 8.0% 16.0% 48.0% 79.0% Source: "Corporate Defaults and Recovery Rates, 19202011," Moody's Global Credit Policy, February 2012. By rating Average beta Average Debt Betas by Rating and Maturity A and above BBB BB 15 Yr Average beta 0.01 0.06 0.07 0.14 Source: S. Schaefer and I. Strebulaev, "Risk in Capital Structure Arbitrage," Stanford GSB working paper, 2009. Annual Default Rates by Debt Rating (1983-2011) Rating: AAA AA A BBB BB B CCC CC-C Default rate: Average 0.0% 0.1% 0.2% 0.5% 2.2% 5.5% 12.2% 14.1% In recessions 0.0% 1.0% 3.0% 3.0% 8.0% 16.0% 48.0% 79.0% Source: "Corporate Defaults and Recovery Rates, 19202011," Moody's Global Credit Policy, February 2012. By rating Average beta Average Debt Betas by Rating and Maturity A and above BBB BB 15 Yr Average beta 0.01 0.06 0.07 0.14 Source: S. Schaefer and I. Strebulaev, "Risk in Capital Structure Arbitrage," Stanford GSB working paper, 2009