To evaluate the relative vulnerability of the counterparties to default, we can estimate their Distance to Default (DD). Using the simplified approximation formula for the Merton model, $DD \\approx \\frac{V - D}{V \\times \\sigma}$, where $V$ is the market value of assets, $D$ is the face value of debt, and $\\sigma$ is the annual volatility of asset values:

• Company P: $DD_P = \\frac{100 - 60}{100 \\times 0.10} = \\frac{40}{10} = 4.00$
• Company Q: $DD_Q = \\frac{150 - 100}{150 \\times 0.07} = \\frac{50}{10.5} \\approx 4.76$
• Company R: $DD_R = \\frac{250 - 160}{250 \\times 0.08} = \\frac{90}{20} = 4.50$

A lower Distance to Default (DD) indicates a higher likelihood of default. Thus, comparing the values, Company P (4.00) is the most likely to default, followed by Company R (4.50), and then Company Q (4.76). Therefore, the correct ranking from most likely to least likely to default is P; R; Q.