FIN 454 Fall21 Assignment 1.pdf H 3/7 o G > a FIN454 Question 2 (5 points) You are doing a valuation in USD. Suppose the growth in the US debt burden makes you doubt that the US treasury is actually default risk free. Your concerns deepen when S&P downgrades the US sovereign rating to AA. Which of the following will you do? Circle one answer: 1. Continue to use the 10-year T-bond rate as my risk free rate, what other choice do I have? 2. Switch from the 10-year T-bond rate to using a short term US treasury bill rate because default is less likely in the short term. 3. Estimate a default spread for the US government and net it out from the 10 year T-bond rate. 4. Use the 10-year Swiss Government bond rate, denominated in Swiss francs because the Swiss government has no default risk. FIN 454 Fall21 Assignment 1.pdf H 3/7 o G > a FIN454 Question 2 (5 points) You are doing a valuation in USD. Suppose the growth in the US debt burden makes you doubt that the US treasury is actually default risk free. Your concerns deepen when S&P downgrades the US sovereign rating to AA. Which of the following will you do? Circle one answer: 1. Continue to use the 10-year T-bond rate as my risk free rate, what other choice do I have? 2. Switch from the 10-year T-bond rate to using a short term US treasury bill rate because default is less likely in the short term. 3. Estimate a default spread for the US government and net it out from the 10 year T-bond rate. 4. Use the 10-year Swiss Government bond rate, denominated in Swiss francs because the Swiss government has no default risk