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Consider a 2-year CDS. Assume the conditional default probability is 9% in year 1 and 11% in year 2. Calculate the present value of the

Consider a 2-year CDS. Assume the conditional default probability is 9% in year 1 and 11% in year 2. Calculate the present value of the expected CDS payout per $1 of notional principal. Assume a 4% riskfree rate and 20% recoverygiven default.

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