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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
16.9Â Â Â Â The spread between the yield on a three-year corporate bond and the yield on a similar risk- free bond is 50 basis points. The recovery rate is 30%. Estimate the average hazard rate per year over the three-year period.
16.10Â Â Â Â Â The spread between the yield on a five-year bond issued by a company and the yield on a similar risk-free bond is 80 basis points. Assuming a recovery rate of 40%, estimate the average hazard rate per year over the five-year period. If the spread is 70 basis points for a three-year bond, what do your results indicate about the average hazard rate in years 4 and 5?
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