An investor buys $5 million of 10-year CDS protection, and the CDS contract has a duration of 8 years. The companys credit spread was originally 200 bps and widens to 500bps.

Which of the following is correct?

A) The CDS buyer will now have to pay a higher coupon to continue the credit protection.

B) None of the other answers are correct.

C) The CDS buyer gains from the change in spread because she can sell the CDS protection for more than she paid.

D) This drop in credit quality of the underlying is a credit event that triggers a CDS protection payout.

E) The CDS seller gains from the change in credit spread because the expected present value of the payout is now lower than the present value of the premium payments.