Question: 1. In a CDS the payoff is a payment made by CDS _ to CDS _ and occurs when the _____ defaults a. buyer; seller;

1. In a CDS the payoff is a payment made by CDS _____ to CDS _______ and occurs when the _______ defaults

a. buyer; seller; buyer

b. seller; buyer; reference entity

c. buyer; seller; reference entity

d. seller; buyer; buyer

e. buyer; seller; seller

2. Consider a credit default swap initiated on April 1, 2012. The notional principal amount is $100 million. The premium payments are made annually at a rate of 180 basis points per year. The swap will last for 5 years. Suppose that default event occurs on December 31, 2014. The recovery rate is 65%. Then the accrual payment is equal to ___________.

a. $0

b. $1,200,000

c. $1,350,000

d. $4,400,000

e. $35,000,000

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Question: 1. In a CDS the payoff is a payment made by CDS _____ to CDS _______ and occurs when the _______ defaults a. buyer; seller;

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Question: 1. In a CDS the payoff is a payment made by CDS _ to CDS _ and occurs when the _____ defaults a. buyer; seller;