Consider the following information regarding corporate bonds: CCC B 5.5% Rating AAA Average Default Rate 0.0% Recession Default Rate 0.0% Average Beta 0.05 AA 0.1% 1.0% 0.05 A 0.2% 3.0% 0.05 BBB 0.5% 3.0% 0.10 BB 2.2% 8.0% 0.17 16.0% 12.2% 48.0% 0.31 0.26 9) 9) Wyatt Oil has a bond issue outstanding with seven years to maturity, a yield to maturity of 7.0%, and a BBB rating. The corresponding risk-free rate is 3% and the market risk premium is 5%. Assuming a normal economy, the expected return on Wyatt Oil's debt is closest to: A) 5.5%. B) 4.9%. C) 3.5%. D) 3.0%. 10) 10) Wyatt Oil has a bond issue outstanding with seven years to maturity, a yield to maturity of 7.0%, and a BBB rating. The bondholders' expected loss rate in the event of default is 70%. Assuming a normal economy the expected return on Wyatt Oil's debt is closest to: A) 6.7%. B) 3.0%. C) 4.9%. D) 3.5%. 11) 11) Nielson Motors plans to issue 10-year bonds that it believes will have an BBB rating. Suppose AAA bonds with the same maturity have a 3.5% yield. Assume that the market risk premium is 5% and the expected loss rate in the event of default on the bonds is 60%. The yield that these bonds will have to pay during a recession is closest to: A) 3.50% B) 5.55%. C) 3.75% D) 4.00%