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URGENT: The current interest rates for 1-year T-strips and 1-year B-rated corporate strips are 3% and 6%, respectively. The rates for their 2-year strips are
URGENT: The current interest rates for 1-year T-strips and 1-year B-rated corporate strips are 3% and 6%, respectively. The rates for their 2-year strips are 6% and 10%, respectively. If the recovery rate is 40% for the bank, what is the marginal default probability on a B-rated loan in year 2? A. 4.72% B. 7.39% C. 4.43% D. 7.13%
URGENT:
The current interest rates for 1-year T-strips and 1-year B-rated corporate strips are 3% and 6%, respectively. The rates for their 2-year strips are 6% and 10%, respectively. If the recovery rate is 40% for the bank, what is the marginal default probability on a B-rated loan in year 2? A. 4.72%
B. 7.39%
C. 4.43%
D. 7.13%
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