(4) A company purchases a credit default swap (CDS) on a corporate bond with a notional value of $5 million. The CDS premium is 2.5% per annum. If a credit event occurs and the recovery rate is 40%, calculate the payout received by the company. \$3 million \$2 million \$1.5 million $5 million A bond portfolio manager expects interest rates to increase. Which of the following interest rate derivatives would be most appropriate to use as a hedge? Interest rate swap Interest rate floor Interest rate cap Interest rate collar