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QUESTION 10 Consider the following statements: Statement 1: Generally speaking, the higher the correlation of default among index constituents, the higher the cost of obtaining credit protection on the index CDS. Statement 2: If the standard coupon rate on a CDS is higher than the credit spread of the reference obligation, the protection buyer will pay an upfront premium to the protection seller. Which of the following is most likely? a) Only Statement 1 is correct. b) Only Statement 2 is correct. c) Both statements are incorrect. o oo