Answer:
B
The unconditional PD for the fourth year is 14.5% minus 10% or 4.5%.The probability of no earlier default is 90%.The PD conditional on no earlier default is therefore 0.045/0.9=0.05 or 5%
Answer:
A
The recovery rate for a bond is usually defined as the value of the bond immediately after a default as a percent of its face value.This is in spite of the fact that the bond holder's claim in the event of a default in many jurisdictions is the face value plus accrued interest.
Answer:
B
Risk neutral default probabilities are usually greater than real world default probabilities.