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Question
The following is information on current spot and forward term structures (assume the corporate debt pays interest annually):
Using the term structure of default probabilities, the implied default probability for BBB corporate debt during the second year is
A. 4.20 percent.
B. 98.0 percent.
C. 2.35 percent.
D. 2.71 percent.
E. 3.88 percent.
Answer
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