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:

Publicly Accountable Enterprises

Businesses that have accountability to a broad group of stakeholders, including shareholders and the public, typically required to follow specific accounting standards.

Debt Issuer

An entity, like a corporation or government, that issues debt instruments such as bonds to raise capital by borrowing from investors.

Banks

Financial institutions licensed to receive deposits and make loans, offer various other financial services.

PSAB

Public Sector Accounting Board, overseeing the creation and implementation of accounting standards for public sector entities in Canada.