Inmid-2009, Ralston Purina hadAA-rated, six-year bonds outstanding with a yield to maturity of 3.77 %

3.77%. At thetime, similar maturity Treasuries had a yield of 2 %

2%.

a. If RalstonPurina's bonds wererisk-free, what is your estimate of the expected return for

thesebonds?

b. If you believe RalstonPurina's bonds have 0.9 %

0.9% chance of default per year and that expected loss rate in the event of default is 25 %

25%, what is your estimate of the expected return for thesebonds?

a. If RalstonPurina's bonds wererisk-free, what is your estimate of the expected return for

thesebonds?

The estimate of the expected return for these bonds is

nothing

%. (Round to two decimalplaces.)

c. If you believe RalstonPurina's bonds have 0.9 %

0.9% chance of default peryear, and that expected loss rate in the event of default is 25 %

25%, what is your estimate of the expected return for thesebonds?

The estimated expected return for these bonds will be

nothing

%. (Round to two decimalplaces.)