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In mid-2009, Rite Aid had CCC-rated, 19-year bonds outstanding with a yield to maturity of 17.3%. At the time, similar maturity Treasuries had a yield
In mid-2009, Rite Aid had CCC-rated, 19-year bonds outstanding with a yield to maturity of 17.3%. At the time, similar maturity Treasuries had a yield of 3%. Suppose the market risk premium is 4% and you believe Rite Aid's bonds have a beta of 0.38. The expected loss rate of these bonds in the event of default is 56%. What annual probability of default would be consistent with the yield to maturity of these bonds in mid-2009? In mid-2012, Rite-Aid's bonds had a yield of 8%, while similar maturity Treasuries had a yield of 1.1%. What probability of default would you estimate now? What annual probability of default would be consistent with the yield to maturity of these bonds in mid-2009? The required return for this investment is %. (Round to two decimal places.) The annual probability of default is %. (Round to two decimal places.) In mid-2012, Rite-Aid's bonds had a yield of 8%, while similar maturity Treasuries had a yield of 1.1%. What probability of default w ould you estimate now ? The probability of default will be %. (Round to two decimal places.)
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