QUESTION 25 ABC Company files for bankruptcy, triggering payments on various CDS contracts written on its obligations. It has two series of senior unsecured bonds outstanding: Bond A trades at 30% of par, and Bond B trades at 40% of par. Mesut Ozil owns $7 million of Bond A and owns $7 million of CDS protection, while Aaron Ramsey owns $7 million of Bond B and owns $ 7 million of CDS protection. An analyst makes the following statements: Statement 1: Ozil would be indifferent between a cash and physical settlement. Statement 2: Ramsey would prefer a cash settlement. Which of the following is most likely? a) Only Statement 1 is incorrect. b) Only Statement 2 is incorrect. c) Both statements are correct. QUESTION 15 For a 5-year pure discount bond that is callable at par after two years, which of the following yield measures will be lowest? A) Current yield B) Yield to first call c) Yield to maturity OC