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A credit default swap requires a semiannual payment at the rate of 60 basis points per year. The principal is $300 million and the credit
A credit default swap requires a semiannual payment at the rate of 60 basis points per year.
The principal is $300 million and the credit default swap is settled in cash. A default occurs
after four years and two months, and the calculation agent estimates that the price of the
cheapest deliverable bond is 40% of its face value shortly after the default. List the cash
flows and their timing for the seller of the credit default swap.
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