There is a 5-year corporate bond currently trading in the market that pays a 5 percent coupon, with (for simplicity) coupon payments made once a year at the end of the year (with the next coupon paid exactly one year from now). The current price of this bond is $1020. b. At the price the corporate bond would be if it where default free (i.e., your answer to part a above), its effective annual yield to maturity should be.03895 (3.896%). At its actual market value of $1020, is it's actual yield to maturity higher, lower, or equal to 3.896%. Circle one: higher than 3.896% lower than 3.896% equal to 3.986% Explain why here: Assume that at a price of $1020, the yield to maturity is 4.544% (by the way, I am not saying it is, I'm just telling you to ASSUME that it is). Based on a recovery rate of 80% (R = .8), what does the market think the probability of default is on this corporate bond? There is a 5-year corporate bond currently trading in the market that pays a 5 percent coupon, with (for simplicity) coupon payments made once a year at the end of the year (with the next coupon paid exactly one year from now). The current price of this bond is $1020. b. At the price the corporate bond would be if it where default free (i.e., your answer to part a above), its effective annual yield to maturity should be.03895 (3.896%). At its actual market value of $1020, is it's actual yield to maturity higher, lower, or equal to 3.896%. Circle one: higher than 3.896% lower than 3.896% equal to 3.986% Explain why here: Assume that at a price of $1020, the yield to maturity is 4.544% (by the way, I am not saying it is, I'm just telling you to ASSUME that it is). Based on a recovery rate of 80% (R = .8), what does the market think the probability of default is on this corporate bond