In late-2019, Rockebakker River (RR) had AA-rated, 10-year bonds outstanding with a yield to maturity of 2.22%.

a. What is the highest expected return RR's bonds could have?

b. At the time, similar maturity Treasuries had a yield of 1.22%. Could RR's bonds actually have an expected return equal to your answer in part (a)?

c. If you believe RR's bonds have 1.5% chance of default per year, and that expected loss rate in the event of default is 44%, what is your estimate of the expected return for these bonds?