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One-year treasury strip yield = 3% Two-year treasury strip yield = 4% One-year corporate strip yield = 7% Two-year corporate strip yield = 10% Based
One-year treasury strip yield = 3%
Two-year treasury strip yield = 4%
One-year corporate strip yield = 7%
Two-year corporate strip yield = 10%
Based on these data, you have to calculate the marginal probability of default over the first year, the marginal probability of default over the second year, and the cumulative probability of default over the two years.
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