In a CDS with a Notional Principal of $100 Million

question 10

Multiple Choice

In a CDS with a notional principal of $100 million the reference entity defaults.What is the payoff to the buyer of protection when the recovery rate is 30%?

• A) $100 million
• B) $30 million
• C) $130 million
• D) $70 million

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Definitions:

Variables

Elements, features, or factors that are likely to vary or change within the context of a scientific experiment or study.

Coefficient of Correlation

A numerical measure that captures the direction and degree of a linear relationship between two variables.

Relationship

A connection, association, or involvement between two or more individuals, which can be social, romantic, professional, or familial.

Falsifiability

A principle that for a theory to be considered scientific, it must be able to be proven false under potential observations or experiments.