What is the probability of bankruptcy

Reference no: EM131368517

1. The firm has a single outstanding debt issue with a promised maturity payment of $120 in 5 years. What is the probability of bankruptcy? What is the credit spread?

2. Suppose the firm issues a single zero-coupon bond with maturity value $100.

a. Compute the yield, probability of default, and expected loss given default for times to maturity of 1, 2, 3, 4, 5, 10, and 20 years.

b. For each time to maturity compute the approximation for the yield:

Reference no: EM131368517

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