An Australian company encounters a credit event, triggering various CDS contracts. It has two series of senior bonds outstanding: Bond A trades at 40% of par, and Bond B trades at 50% at par. Investor X owns AUD20 million of Bond A and owns AUD20 million of CDS protection. Investor Y owns AUD20 million of Bond B and owns AUD20 million of CDS protection. As a credit analyst, your manager assigns you the following task: Required a. Define a credit event and discuss different types of credit events. (6 marks) b. Determine the recovery rate for both CDS contracts both (2 marks) C. Explain whether Investor X would prefer to cash settle or physically settle her CDS contract or whether she is indifferent. (6 marks) d. Explain whether Investor Y would prefer to cash settle or physically settle her CDS contract or whether she is indifferent. 0 (6 marks) 20