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Suppose that two companies enter into a three-year credit default swap on March I, 2007. The notional principal of the contract is $50 million, and

Suppose that two companies enter into a three-year credit default swap on March I, 2007. The notional principal of the contract is $50 million, and the protection-against-default fee is 75 basis points per year (paid annually in arrears). If the reference entity does not default during the first year, what would be the payoff of the buyer

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