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Consider the following information regarding corporate bonds: Rating AAA AA A BBB BB B CCC Average Default Rate 0.0% 0.0% 0,2% 0,4% 2.1% 5.2% 9.9%

Consider the following information regarding corporate bonds:

Rating AAA AA A BBB BB B CCC
Average Default Rate 0.0% 0.0% 0,2% 0,4% 2.1% 5.2% 9.9%
Recession Default Rate 0.0% 1.0% 3.0% 3.0% 8.0% 16.0% 43.0%
Average Beta 0.05 0.05 0.05 0.10 0.17 0.26 0.31
Company Market Capitalisation ($mm) Total Enterprise Value ($mm) Equity Beta Debt Rating
Taggart Transcontinental $4,500 8,000 1.1 BBB
Rearden Metal $3,800 7,200 1.3 AAA
Wyatt Oil $2,400 3,800 0.9 A
Nielson Motors $1,500 4,400 1.75 BB

Your estimate of the asset beta for Rearden Metal is closest to:

0.66

0.59

0.71

0.42

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