Question
The government of Ethniclashistan has issued 10 year sovereign bonds with face value of $100,000, 5% coupon paid annually, at a price of $
The government of Ethniclashistan has issued 10 year sovereign bonds with face value of $100,000, 5% coupon paid annually, at a price of $ 74,329.37 Meanwhile, US Treasury bonds with the exact same specifications (same face value, maturity and coupon structure) are selling in the market for $ 100,000. Based on this information, what is the probability that Ethniclashistan bonds default sometime within the next 10 years?
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