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Consider the following 1-year Credit Default Swap: The probability of a default during any given year (conditional on no default during previous years) is 3%,

Consider the following 1-year Credit Default Swap: The probability of a default during any given year (conditional on no default during previous years) is 3%, so the CDP = 3%. The risk-free rate (LIBOR) is 5% per year The recovery rate is R = 30% CDS buyer gets 70% of face value if a default occurs. What is the present value of the expected premium from this CDS?

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