1. Credit risk measures using the reduced form model: assume a company has the following values for its debt issue. Face value of the firms debt: K = $1,000 Time to maturity of the debt (tenor): T t = 1 year (T = maturity) Default intensity (approx prob of default per year): = 0.02 Loss given default: = 0.3 (30%) P(t,T) = 0.95 What is the probability that the debt will default over the time to maturity? (Select the answer that most closely matches the results of your calculations.)

   	A.	1.980%
   	B.	2.222%
   	C.	1.673%