CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

Assume a company's 10-year credit spread is 450 bps. The duration of a CDS (5% coupon) is 5 years. What is the approximate upfront premium if the notional amount of the CDS is $10 million?

A. the protection seller will pay $0.25 million to the protection buyer.
B. the protection seller will pay $0.50 million to the protection buyer.
C. the protection buyer will pay $0.50 million to the protection seller.
Correct Answer: A

(450 - 500)bps x 5 x 10 million = -$0.25 million.

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