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Rating 1 2 3 AAA 0.00 0.03 0.13 AA 0.02 0.06 0.11 A 0.05 0.13 0.22 BBB 0.16 0.43 0.75 BB 0.63 1.93 3.46 B
Rating 1 2 3 AAA 0.00 0.03 0.13 AA 0.02 0.06 0.11 A 0.05 0.13 0.22 BBB 0.16 0.43 0.75 BB 0.63 1.93 3.46 B 3.34 7.80 11.75 CCC/C 28.30 38.33 43.42 In addition, assume that the recovery rate of a defaulted bond is 60%. 1. The table shows that % (two decimal places) of a bond rated AA 1% would default within one year. Meanwhile, given that the loss rate is (round to the nearest unit), on average, the holder of a A bond maturing in one year will need a spread of basis points (round to the nearest unit) to have an expected investment return equivalent to a risk-free asset of the same maturity. In other words, if the one-year risk-free rate is 1.05%, the yield of a A bond should be at least % (two decimal places)
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