1. Wyatt Oil has a bond issue outstanding with seven years to maturity, a yield to maturity of 7.0%, and a BBB rating. The bondholders' expected loss rate in the event of default is 70%. You are also given the following information for corporate bonds. Assuming the economy is in normal conditions, the expected return on Wyatt Oil's debt is closest to:

   Rating	AAA	AA	A	BBB	BB	B	CCC
   Average Default Rate	0.0%	0.1%	0.2%	0.5%	2.2%	5.5%	12.2%
   Recession Default Rate	0.0%	1.0%	3.0%	3.0%	8.0%	16.0%	48.0%
   Average Beta	0.05	0.05	0.05	0.10	0.17	0.26	0.31

   	A.	8.15%
   	B.	6.65%
   	C.	7.01%
   	D.	6.71%