ABC IncHas a Risk-Neutral Probability of Default of 5% Over Every

question 12

Multiple Choice

ABC Inc.has a risk-neutral probability of default of 5% over every half-year period.The loss-given-default (LGD) is 75% of the face value of the debt in ABC Inc.If the risk-free interest rate for one year is 10% on a semiannual compounding basis,find the fair spread for a one-year maturity,semiannual pay CDS contract.Assume that the spread is paid at the beginning of each half-year,while default,if it occurs,occurs at the end of each semiannual period.

• A)228 bps
• B)357 bps
• C)428 bps
• D)551 bps

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Definitions:

Supervises Closely

Refers to a management approach where a supervisor monitors their subordinates' work very closely.

Vroom-Jago Leadership Model

A decision-making framework that suggests leadership effectiveness is a function of the leader's ability to assess the importance of participation and the distribution of power in decision-making processes.

Core Leadership Styles

The fundamental approaches to leadership, such as autocratic, democratic, and laissez-faire, that influence how a leader directs or guides a team.

Sell

The act of exchanging a product or service for money.