Suppose that the risk-free zero curve is flat at 0.06 per annum with continuous compounding and that defaults can occur half way through each year in a new two-year credit default swap. Suppose that the recovery rate is 0.26 and the default probabilities each year conditional on no earlier default is 0.02 Estimate the credit default swap spread. Assume payments are made annually. Rates are quoted in numbers, i.e. 0.05 is 5% rate. Please write your answer also in numbers.

Suppose that the risk-free zero curve is flat at 0.06 per annum with continuous compounding and that defaults can occur half way through each year in a new two-year credit default swap. Suppose that the recovery rate is 0.26 and the default probabilities each year conditional on no earlier default is 0.02 Estimate the credit default swap spread. Assume payments are made annually. Rates are quoted in numbers, i.e. 0.05 is 5% rate. Please write your answer also in numbers.