4. The true price of 5 different defaultable coupon paying bonds with non-zero recovery are specified in worksheet Calibration in the workbook Assignment5_cds.xlsx. The interest rate is r = 5% per annum. Calibrate the six month hazard rates A6 to A16 to by minimizing the Sum Error ensuring that the term structure of hazard rates are non-decreasing. You can model the non-decreasing hazard rates by adding constraints of the form A6 A7,...,A15 A16. Report the hazard rate at time 0 as a percentage. Submission Guideline: Give your answer in percent rounded to two decimal places. For example, if you compute the answer to be 73.2367%, submit 73.24..

5. Modify the data on the CDS pricing worksheet in the workbook bonds_and_cds.xlsx to compute a par spread in basis points for a 5yr CDS with notional principal N =10 million assuming that the expected recovery rate R =25%, the 3-month hazard rate is a flat 1%, and the interest rate is 5% per annum.

Submission Guideline: Give your answer in basis points rounded to two decimal places (1 bps = 0.01%). For example, if you compute the answer to be 73.2367 bps, submit 73.24