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1- The following information is given about a corporate bond: P or probability of repayment = 89% (1 P) Probability of default = 11% LGD or Loss given default = 50% Rf or risk-free rate = 2% Determine the risk-neutral lending rate for the corporate bond.

2- Following up on question 1, assume the lender demands an additional premium of 3% as a result of risk aversion. What will be the rate charged by the lender?

3- If the existing one-year risk-free rate is 1.21% and the average market yield of one-year AA-rated corporate bonds is 1.51%. What expected probability of repayment has been determined by the market?

4- Assume the existing one-year risk-free rate is 4% and the average market yield of one-year BBB-rated corporate bonds is 8.5%. What expected probability of repayment has been determined by the market?

1- The following information is given about a corporate bond: Por probability of repayment = 89% (1-P) Probability of default = 11% LGD or Loss given default = 50% Rf or risk-free rate = 2% Determine the risk-neutral lending rate for the corporate bond. 2- Following up on question 1, assume the lender demands an additional premium of 3% as a result of risk aversion. What will be the rate charged by the lender? 3- If the existing one-year risk-free rate is 1.21% and the average market yield of one-year AA-rated corporate bonds is 1.51%. What expected probability of repayment has been determined by the market? 4- Assume the existing one-year risk-free rate is 4% and the average market yield of one-year BBB-rated corporate bonds is 8.5%. What expected probability of repayment has been determined by the market

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