Macys Inc has just issued CCC-rated, 5-year bonds outstanding with a yield to maturity of 18%. Similar maturity Treasuries have a yield of 3% (this is the risk-free rate). Suppose the market risk premium is 9% and you believe Macys bonds have a beta of 0.60. If the expected loss rate of these bonds in the event of default is 70%, what annual probability of default would be consistent with the yield to maturity of these bonds?

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