3. Using the Internet, choose a country with a credit rating from Standard & Poor's that lies between "B" and "BBB" (inclusive, meaning the country may also be rated either B or BBB) and determine its current 5-year credit default swap (CDS) price. Compare that price to the following cumulative default probailtiy data. (96) Rating 1 2 3 --Time horizon (years)-- 5 6 7 8 9 10 11 12 13 14 15 AAA 0.00 0.03 0.13 0.24 AA 0.02 0.06 0.12 0.22 0.32 0.42 0.51 A 0.06 0.14 0.23 0.35 0.35 0.45 0.51 0.59 0.65 0.70 0.73 0.76 0.79 0.85 0.92 0.59 0.66 0.73 0.80 0.86 0.92 0.98 1.04 0.49 0.63 0.81 0.96 1.12 888 0.17 0.46 0.80 1.22 1.28 1.43 1.57 1.71 1.83 198 1.64 2.05 2.41 2.76 3.11 3.44 3.79 4.06 4.32 4.59 4.87 BB B 0.65 2.01 3.63 5.25 6.78 8.17 9.36 10.43 11.38 12.22 12.92 13.56 14.13 14.63 15.17 3.44 7.94 11.86 14.95 17.33 19.26 20.83 22.07 23.18 24.21 25.08 25.73 26.31 26.87 27.43 26.89 36.27 41.13 43.94 46.06 46.99 48.20 49.04 49.80 50.44 50.96 51.51 52.16 52.72 52.80 Investment 0.09 0.25 0.43 0.66 0.90 1.14 1.36 1.56 1.77 1.96 2.16 2.32 2.48 2.63 2.80 grade / Speculative 3.66 7.13 10.12 12.56 14.55 16.18 17.55 18.69 19.70 20.62 21.39 22.02 22.60 23.13 23.65 grade All rated 1.48 2.91 4.16 5.21 6.08 6.82 7.44 7.97 8.44 8.88 9.26 9.58 9.87 10.13 10.41 Source: S&P Global Fixed Income Research a) Considering this information, do you believe the CDS price you found for the country you selected is a fair price? Brieflt explain your answer. b) What is the expected recovery rate assumed within this CDS price? Do you believe that recovery rate is realistic? Why or why not?