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Question 2 : Assume the existing one - year risk - free rate is 1 . 5 % , the market risk premium is 2

Question 2: Assume the existing one-year risk-free rate is 1.5%, the market risk premium is 2%, the average loan rate is 4%, and the loss given default is 25%, what is the expected probability of repayment as determined by the market? Input your answer to 4 decimal places, enter 6.26% as .0626

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