Question: Denote conditional default probability for a firm X as p per year, and the RR as R. The risk-free rate is 5 per cent per

Denote conditional default probability for a firm X as p per year, and the RR as R. The risk-free rate is 5 per cent per year. Default always occurs at the end of the year. The spread for a 5-year plain vanilla CDS is 120 bps and the spread for a similar 5-year binary CDS is 160 bps. What is the value of p and R?

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