If the portfolio described in #2 has a contractual coupon rate of 6.2%/year, what is its expected annual yield? (Your answer should be a % carried to 2 places.)

Question #2 (needed to answer question above):

1. Morgan Stanley manages a well-diversified, speculative grade bond portfolio which is expected to have an annual default rate of 4.2% and loss given default of 60%. What is the portfolios expected loss over the next 12 months? (Your answer should be a % carried to 2 places.) 4.2% x 60%= 2.52% for expected loss