1. Consider a 2-year CDS with $1.00 notional principal. Default intensities are 8% and 15% in years 1 and 2. The discount rate is 5% and the CDS spread is 6.73%. What is the present value of the CDS payments? Record your answer with four decimal places of precision.
2. Assume that 19% of a certain type of bonds default during year 1, 24% default during year 2, 5% default during year 3, and 10% default during year 4. What is the year 3 conditional default probability?