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Assume you can buy a 1-year Slovenian government bond for 930 Euros. The bond has a face value of 1,000 Euros and does not make

Assume you can buy a 1-year Slovenian government bond for 930 Euros. The bond has a face value of 1,000 Euros and does not make any coupon payment.

  1. What is the implied 1-year rate on the bond?
  2. The credit rating agency Moodys assigns a Baa1 sovereign rating to Slovenia. Moodys reports an associated default spread of 1.80%. What is the correct risk-free rate for Slovenia?

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