Question: 1. Calculate the equilibrium CDS spread given the following parameters. Conditional year 1 default probability: 1% Conditional year 2 default probability: 6% Recovery rate given

1. Calculate the equilibrium CDS spread given the following parameters. Conditional year 1 default probability: 1% Conditional year 2 default probability: 6% Recovery rate given default: 5% Riskfree rate: 10% Report your answer in percentage form.

2. Calculate the present value of the expected CDS payout per $1 of notional principal given the following parameters. Conditional year 1 default probability: 12.7% Conditional year 2 default probability: 10.6% Recovery rate given default: 17% Riskfree rate: 3.0%

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