5.

Question 5

Quiz instructions

Modify the data on the CDSpricing{\tt CDS \,pricing}

CDSpricing worksheet in the workbook bonds_and_cds.xlsx{\tt bonds\_and\_cds.xlsx}

bonds_and_cds.xlsx to compute a par spread in basis points for a 5yr CDS with notional principal N=10N =10

N=10 million assuming that the expected recovery rate R=25%R = 25\%

R=25%, the 3-month hazard rate is a flat 1%1\%

1%, and the interest rate is 5%5\%

5% per annum.

Submission Guideline: Give your answer in basis points rounded to two decimal places (1 bps = 0.01%). For example, if you compute the answer to be 73.2367 bps, submit 73.24.