Assume That F₁ = 13

Multiple Choice

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

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