Using the following formula:
| PD = 1 − (1 + T-bill yield / 1 + Corp Bond yield) |
| 0.0376 |
= 1 − (1 + T-bill yield / 1.1125) |
| T-bill yield |
= 0.0376 − 1 × 1.125 |
| |
= 8.27% |
It is always useful to check that this is correct by plugging the answer back into the formula:
0.0376 = 1 − (1.0827 / 1.125)
