QUESTION 3 CCC 11.0 Consider the following information regarding corporate bonds: Rating AAA A BBB BB | Average Default Rate 0.0% 0.0% 0.2% 0.4% 2.1% 5.2% 9.9% Recession Default Rate 0.0% 1.0% 3.0% 3.0% 8.0% 16.0% 43.0% Average Beta 0.05 0.05 0.05 |0.17 0.26 0.31 Rearden Metal has a bond issue outstanding with ten years to maturity, a yield to maturity of 8.6%, and a B rating. The bondholders expected loss rate in the event of default is 50%. Assuming a normal economy the expected return on Rearden Metal's debt is closest to: 04.6% 0 1.6% 0 6.0% O 0.6%