Assume the following: the face value of the pool of senior bonds is $500 million and junior bonds $200 million. The principal payments are $20 million per month. No losses are expected for the senior tranche in the first year. Calculate monthly premiums for a buyer of CDS for the first six months if the notional value of the swap transaction is $1500 million and the swap spread is 8.5%.

500 =Face value of the senior tranche ;

300=Face value of the junior tranche;

20=Mortgage principal received each month;

1500=Notional value of swap transaction;

8.50%=Swap spread