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The spread between the yield on a 10-year corporate bond and the yield on a similar risk-free bond is 310 basis points. The recovery rate
The spread between the yield on a 10-year corporate bond and the yield on a similar risk-free bond is 310 basis points. The recovery rate is 40%.
i) Estimate the average hazard rate over the 10-year period.
ii) Compute the probability that the company issuing the bond will default in 10 years.
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