Question: ( 4 pts each ) Suppose that the risk - free zero curve is flat at 6 % per annum with continuous compounding and that

(4pts each) Suppose that the risk-free zero curve is flat at 6% per annum with continuous compounding and that defaults can occur half way through each year in a new two-year credit default swap. Suppose that the recovery rate is 20% and the default probabilities each year conditional on no earlier default are 3%, Estimate the credit default swap spread. Assume payments are made annually.
(1) Find the table corresponding to unconditional default probabilities and survival probabilities.
(2) Calculate the present value of the s per year.
(3) Calculate the present value of the expected payoffs when the notional principal is $1.
(4) Calculate the present value of accrual payments. -1252610+>
(5) Evaluate the credit default swap spread s.
(4pts each) Suppose that the risk-free zero curve is flat at

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