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What the credit default swap premium on this bond

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Reference no: EM133112966

Question - Consider a 10-year bond that has a yield-to-maturity of 4% and a credit rating of BBB. Assume that the probability that the company will default on the bond during next year is 0.5% and that investors' recovery rate upon default is 40%. In addition, assume that the 10-year risk free rate is 2.5%. What the CDS (credit default swap) premium on this bond?

Reference no: EM133112966

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