Consider a first-to-default basket (FTD) that pays (1 − R) upon the default of the first credit in a basket of 3 credits. Protection on the FTD lasts 5 years and payments are made quarterly. The annualized contract spread is 800 bps. The three credits have constant hazard rates of 4%, 6%, and 10% respectively. Each credit has a correlation of ρ = 0.2 and a recovery of 0.5. Using a Gaussian copula, simulate default times and compute the present value of the contract. Assume a constant interest rate of 3%. Try again with ρ = 0.5. Comment on the relationship between default correlation and value of an FTD.