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 4%. Suppose the market risk premium is 5% and you believe Rite Aid's bonds have a beta of 0.37. 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?

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 6.8%, while similar maturity Treasuries had a yield of 1.4%. What probability of default would you estimate now?

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