maturity Treasuries

30.In mid-2009, Rite Ad had CCC-rated, 20-year bonds outstanding with a yield to maturity of 17.3%. At the time, similar maturity Treasuries had a yield of 3%. Suppose the mark risk premium is 5% and you believe Rite Aid’s bonds have a beta of 0.38. If the expected loss rate of these bonds in the event of default is 58%. In mid-2012, Rite Aid’s bonds a had a yield of 8.2%, while similar maturity Treasuries had a yield of 0.8%. What probability of default would you estimate now?

The probability of default will be 10.48%.

The probability of default will be 8.48%.

The probability of default will be 11.48%.

The probability of default will be 9.48%.