Assume That F₁ = 13

Multiple Choice

Assume that f₁ = 13.50 per cent and c₁ = 17.40 per cent. Which of the following statements is true?

A) The expected default probability of repayment is 96.10 per cent.
B) The expected probability of repayment is 3.32 per cent.
C) The one-year rate expected on corporate securities one year into the future is 13.50 per cent.
D) The current one-year rate on corporate securities is 17.40 per cent.