1. Which of the following statements regarding a credit default swap is most accurate?
A The seller of a CDS wants the credit quality of the reference entity to worsen.
B The buyer of a CDS wants the credit quality of the reference entity to improve.
C The seller of a CDS wants the credit quality of the reference entity to improve.
2. A trader takes a short position in 5 Eurodollar futures contract at the futures price of 98.14. A short time later, the trader closes out the position at a price of 98.27. What is the trader’s total gain or loss on the trade?
A A loss of $325
B A gain of $325
C A loss of $1,625
D A gain of $1,625