A bond has a current value of $950 and promises to pay $1,000 at the end of 4 years.The expected return on the asset is 12% and the risk free rate is 3%.If the actual cash payout in case of default is 0,what is the true default probability given that the asset has a standard deviation of 18%?
A) 15.2%
B) 21.5%
C) 33.2%
D) 49.6%
Correct Answer:
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