A 6 month Treasury bill is currently yielding 0.15 percent.A BBB-rated bond with similar term is yielding 18.24 percent.If the expected loss rate in case of default is 55 percent of the principle and the interest,what would be the implied probability of default?

A 6 month Treasury bill is currently yielding 0.15 percent.A BBB-rated bond with similar term is yielding 18.24 percent.If the expected loss rate in case of default is 55 percent of the principle and the interest,what would be the implied probability of default?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 9P

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

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