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show work Credit risk measures using the reduced form model: assume a company has the following values for its debt issue. Face value of the
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Credit risk measures using the reduced form model: assume a company has the following values for its debt issue. Face value of the firms debt: K = $1,500 Time to maturity of the debt (tenor): T t = 0.5 year (T = maturity) Default intensity (approx prob of default per year): = 0.03 Loss given default: = 0.35 (35%) P(t,T) = 0.92 (a) Calculate the probability that the debt will default over the time to maturity. (b) Calculate the expected loss. (c) Calculate the present value of the expected loss
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