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Question 1 through Question 4 are based on the information on current spot and forward term structures (assume the corporate debt pays interest annually) in Table 1: Table 1. Term Structure of treasury bills/bonds and BBB corporate debt Spot 1 Year Spot 2 Year (1-year maturity) forward 1-year Treasury 2.75 percent 5.25 percent X BBB Corporate Debt 5.25 percent 8.75 percent Y Question 1. Which one of the following is closest to the value of X and Y respectively? Hint: Based on the table, X denotes the implied forward rate on one-year maturity Treasuries to be delivered in one year, or in other words, the risk-free interest rate in the second year. Y denotes the implied forward rate on one-year BBB corporate debt to be delivered in one year. OA) X = 6.23%, Y = 10.25% B) X = 7.81%, Y = 10.25% OC) X = 8.25%, Y = 12.37% OD) X = 7.81%, Y = 12.37% Question 2 (Mandatory) (6.25 points) Using the term structure of default probabilities in Table 1, what is the implied default probability for BBB corporate debt during the first year? A) 98.24% B) 2.38% C) 97.63% OD) 4.52% E) 3.94%