In mid-2009, Rite Aid had CCC-rated, 6-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 5 % and you believe Rite Aid's bonds have a beta of 0.31. The expected loss rate of these bonds in the event of default is 60 %. a. What annual probability of default would be consistent with the yield to maturity of these bonds in mid-2009? b. In mid-2015, Rite-Aid's bonds had a yield of 7.1 %, while similar maturity Treasuries had a yield of 1.5 %. What probability of default would you estimate now?

a. 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.)

b. In mid-2015, Rite-Aid's bonds had a yield of 7.1%, while similar maturity Treasuries had a yield of 1.5%. What probability of default would you estimate now?

The probability of default will be _______%. (Round to two decimal places.)