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In class, we have discussed the formula: (1+i) = (1+p)(1+i+p) +p(0) where p is the probability of default (the bond does
Posted: Thu May 19, 2022 10:30 am
by answerhappygod
- In Class We Have Discussed The Formula 1 I 1 P 1 I P P 0 Where P Is The Probability Of Default The Bond Does 1 (22.04 KiB) Viewed 40 times
In class, we have discussed the formula: (1+i) = (1+p)(1+i+p) +p(0) where p is the probability of default (the bond does not pay at all), i is the nominal policy interest rate and x is the risk premium Calculate the probability of default when the nominal interest rate for a risky borrower (borrowing rate) is 8% and nominal policy rate is 3% O a. 1% O b. 3% O c. 5% O d. 7%