What annual probability of default would be consistent with, Financial Management

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What annual probability of default would be consistent with

In? mid-2009, Rite Aid had? CCC-rated, 7?-year bonds outstanding with a yield to maturity of 17.3%. At the? time, similar maturity Treasuries had a yield of 4%.

Suppose the market risk premium is 5% and you believe Rite? Aid's bonds have a beta of 0.34.

The expected loss rate of these bonds in the event of default is 55%.

a. What annual probability of default would be consistent with the yield to maturity of these bonds in? mid-2009?

b. In? mid-2015, Rite-Aid's bonds had a yield of 6.8%?, while similar maturity Treasuries had a yield of 1.6%.

What probability of default would you estimate? now?

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