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Consider the following information regarding corporate bonds: Rating AAA AA A BBB BB B CCC Average Default Rate 0 . 0 % 0 . 1

Consider the following information regarding corporate bonds: Rating AAA AA A BBB BB B CCC Average Default Rate 0.0%0.1%0.2%0.5%2.2%5.5%12.2% Recession Default Rate 0.0%1.0%3.0%3.0%8.0%16.0%48.0% Average Beta 0.050.050.050.100.170.260.31 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 4.1% yield. Assume that the market risk premium is 4% and the expected loss rate in the event of default on the bonds is 73%. The yield that these bonds will have to pay during a recession is closest to (%)(2 decimal places):

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