Question: Problem 2 : 5 - year CDX NA IG Bond index is quoted by a market maker as bid 2 0 1 bp , ask

Problem 2:
5-year CDX NA IG Bond index is quoted by a market maker as bid 201 bp , ask (offer)
205 bp. This index includes 125 North American investment-grade companies. Suppose
you want $750,000 of protection for each company.
a. How much per year will you pay in CDS premia?
b. When one of the 125 companies defaults, your annual premium payment will be reduced
by how much?
Problem 2: 5-year CDX NA IG Bond index is quoted by

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