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Q15. An analyst believes that the credit risk on a 5-year, 5% annual payment corporate bond can be expressed by a yearly probability of default
Q15. An analyst believes that the credit risk on a 5-year, 5% annual payment corporate bond can be expressed by a yearly probability of default of 4% and a recovery rate of 20%. Given that the government yield curve is flat at 2.5%, what is the credit spread and credit valuation adjustment calculations for the bond using the table below:
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