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Assume that there is a 1 0 % per annum risk of default for Italian bonds, and that upon default the Italian bonds are expected
Assume that there is a per annum risk of default for Italian bonds, and that upon default the Italian bonds are
expected to pay of par value. The riskfree return on German bonds is per annum. What is the credit
default swap rate for Italian bonds, if investors have riskneutral preferences regarding possible default?
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