Suppose the market risk premium is $6\%$ and you believe Rite$$ Aid's bonds have a beta of $0\mathrm{.}31.$ The expected loss rate of these bonds in the event of default is $52\%.$

a$.$ What annual probability of default would be consistent with the yield to maturity of these bonds in$$ mid$-2009?$

b$.$ In$$ mid$-2015,$ Rite$-$Aid's bonds had a yield of $7\mathrm{.}3\%,$ while similar maturity Treasuries had a yield of $1\mathrm{.}6\%.$ What probability of default would you estimate$$ now?

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Part $1$

a$.$ What annual probability of default would be consistent with the yield to maturity of these bonds in$$ mid$-2009?$

The required return for this investment is $($Round to two decimal$$ places.$)$

Part $2$

The annual probability of default is $($Round to two decimal$$ places.$)$

Part $3$

b$.$ In$$ mid$-2015,$ Rite$-$Aid's bonds had a yield of $7\mathrm{.}3\%,$ while similar maturity Treasuries had a yield of $1\mathrm{.}6\%.$ What probability of default would you estimate$$ now?

The probability of default will be $($Round to two decimal$$ places.$)$