Problem 4 PartA Credit quants infer default probabilities from prices. Suppose two bonds have been just issued, they both have face value of $100 and a maturity of 5 years. But the first is risk-free (and has a price of $70) while the second has recovery probability and recovery rate equal to 50% (and is sold for $40). The spread between the interest rates of the the risky bond and the default-free bond is 4%. Which is the implied default probability of the risky bond