Question: CDS question. please show steps and pick from the Mulitple choice answers! A. There is only one possible default event at t=0.5. The the default

CDS question. please show steps and pick from the Mulitple choice answers!

A. There is only one possible default event at t=0.5. The the default probability is 10% and the recovery rate is 0.4 . What is the expected payoff from the CDS (for each $1 of principal)? What is the payoff from the CDS after the default event occurs (for each $1 of principal)? a. $0.4 and $0.04 b. $0.04 and $0.4 c. $0.6 and $0.06 d. $0.06 and $0.6

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