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You have obtained the following default probabilities for a Standard and Poors B-rated company, Risky Corp.: Time(Years) Default Prob Survival Prob Discount Factor 1 0.059
You have obtained the following default probabilities for a Standard and Poors B-rated company, Risky Corp.: Time(Years) Default Prob Survival Prob Discount Factor 1 0.059 0.941 0.9704 2 0.062 0.879 0.9418 3 0.063 0.816 0.9139 4 0.062 0.754 0.8869 5 0.060 0.694 0.8607 (i.) Find the CDS spread, s, per dollar of notional. To facilitate computation, you can assume that payments are made annually in arrears and defaults occur at year end (no accrual calculations), and the expected recovery rate is 40%.
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