$3$ bonds with Face value $$100$ each default independently with probability $2\%$ every year.

The maturity for each bond is $2$ years.

All are zero coupon.

Suppose that the risk free rate is is $0\%$ for simplicity.

What is the price of a $2$ year $2$nd to default credit default swap on the $3$ bonds? Recall that a $2$nd to default CDS pays $$100$ if any $2$ of the $3$ bonds default, and pays nothing

otherwise.

Answer Choices:

$$0\mathrm{.}118$

$$2\mathrm{.}06$

$$3\mathrm{.}12$

$$4\mathrm{.}00$