The following table shows the probability of default (%) for companies starting with a particular credit rating.

What is the probability of a bond initially rated Ba defaulting during the fifth year?

		a. 8.955%
		b. 10.065%
		c. 2.226%
		d. 4.694%

Time (years) . Baa Ba B Caa 1 0.000 0.022 0.062 0.174 1.110 3.904 15.894 2 0.013 0.068 0.199 0.504 3.071 9.274 27.003 3 0.013 0.136 0.434 0.906 5.371 14.723 35.800 4 0.037 0.260 0.679 1.373 7.839 19.509 42.796 5 0.104 0.410 0.958 1.862 10.065 23.869 48.828 7 0.241 0.682 1.615 2.872 13.911 31.774 56.878 10 0.489 1.017 2.759 4.623 19.323 40.560 66.212