During the recession in mid-2009, homebuilder KB Home had outstanding 66-year bonds with a yield to maturity of 8.5 % and a BB rating. If corresponding risk-free rates were 3.0%, and the market risk premium was 5.0%, estimate the expected return of KB Home's debt using two different methods. How do your results compare?

B12-16 (bookistatic) During lo tha e aga lass ata for unsecured da t isabout 60% annual data it atas b debt ra n hare and a-raga debt batas y ran g an matrt hera Cancidering the prabcbiy af default the expectce rctum of the bendis Round to twa decmal pla:cs Data Table TABLE 12.2 Annual Default Rates by Debt Rating (1983-2011) Rating: Detault Rate Average 0.1% li, Roassions 0.096 1.0% Ssnice: "Corporate Defaults a - 0.2% 3.0% 0.5% 3.0% 2.2% 8.0% 5,5% 16.0% 12.2% 48.0% 14.1% 79.0% and Recovery Rates, 1920 2011, JMosats ol Ceo og, Tebruary 2012 Prim Done