What is the implied probability of default


Assignment:

The 1-year risk-free rate is 4%, and the yield on a 1-year zero-coupon corporate bond is 7% per year. Assuming a recovery rate of zero, what is the implied probability of default?

a. 2.80%

b. 3.23%

c. 11.00%

d. 11.28%

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Finance Basics: What is the implied probability of default
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