## Solution Library

# Calculate The Implied Probability Of Repayment For A B-Rated Debt

**Question**

The following represents two yield curves.

Maturity |
Pure Discount Treasury Yields |
B-rated Corporate Bond Yields (Pure Discount Bonds) |

1 year |
3 percent |
6 percent |

2 year |
6 percent |
10 percent |

20 year |
12 percent |
17 percent |

1. What is the implied probability of repayment on one-year BÃ¢â‚¬â€˜rated debt?

a. 95.00 percent.

b. 97.17 percent.

c. 94.00 percent.

d. 97.00 percent.

e. 97.09 percent.

2. What rate is expected on a one-year BÃ¢â‚¬â€˜rated corporate bond in one year? (Hint: Use the implied forward rate.)

a. 10.0 percent.

b. 9.09 percent.

c. 14.15 percent.

d. 12.0 percent.

e. 17.0 percent.

3. What spread is expected between the one-year maturity BÃ¢â‚¬â€˜rated bond and the one-year Treasury bond in one year?

a. 3.00 percent.

b. 5.06 percent.

c. 4.00 percent.

d. 5.00 percent.

e. 7.00 percent.

4. What is the expected probability of default in year 2 of two-year maturity BÃ¢â‚¬â€˜rated debt?

a. 2.83 percent.

b. 3.00 percent.

c. 4.43 percent.

d. 2.68 percent.

e. 5.00 percent.

5. What is the probability that two-year BÃ¢â‚¬â€˜rated corporate debt will be fully repaid?

a. 92.9 percent.

b. 95.6 percent.

c. 97.2 percent.

d. 7.10 percent.

e. 4.40 percent.**Summary**

These short questions belong to Finance and it is about calculating the implied probability of repayment for 1 year B-rated debt, the expected rate for 1 year on the B-rated debt, the spread expected in 1 year maturity on the debt, expected probability of default in 2 year maturity for B-rate debt.

**Total Word Count 66**

## Comments

Rashathis is a very good website

maaniI have 50 questions for the same test your page is showing only 28

joeannehi can you please help or guide me to answer my assignments. thanks

joeannehi can anyone help or guide me to my assignments. thanks

MonikCristinaThis solution is perfect ...thanks

JaneteHello Allison,I love the 2nd image that you did! I also, had never heard of SumoPaint, is something that I will have to exolpre a bit! I understand completely the 52 (or so) youtube videos that you probably watched. Sometimes they have what you want, sometimes they don't! However, it is always satisfying when you are able to produce something that you have taught yourself. Great job!Debra 0 likes

SandeepPerfect bank of solution.

Oxanagreat !

Paul Brandon-Fritziusthanks for the quick response. the solution looks good. :)

tina Johnsonthnx for the answer. it was perfect. just the way i wanted it.

Giuseppeworks fine.