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1. A 4-year corporate bond pays a coupon of 6% per year. The term structure of risk-free interest rates is flat at 3% (annual) and is expected to stay unchanged in the future. If the risk neutral conditional probability of default of this company is 1.5% for a 1-year period and the recovery rate in event of default is 35% (assumed constant) Compute the CVA and the credit spread of this bond
2. A 4-year zero coupon bond issued by a company with a hazard rate of 2.5%. The recovery rate of the bond if the company defaults is 60%. The benchmark risk free rate is 4.5%. Compute the CVA for the corporate bond.
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