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Assume the interest rate in the market for one-year zero-coupon government bonds is i = 8% and the rate for one-year zero-coupon grade BBB bonds

Assume the interest rate in the market for one-year zero-coupon government bonds is i = 8% and the rate for one-year zero-coupon grade BBB bonds is k = 10.2%. What is the implied probability of repayment on the corporate bond (round to two decimals)?

(a) 2.00%. (b) 5.04%. (c) 97.96%. (d) 98.00%. (e) 90%

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