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MGN Bank recently bought credit default protection of $15 million notional value against each of three sovereign bonds it holds in its portfolio of securities. The credit default protection is in the form of credit default swaps (CDS) with three years to maturity. If all three sovereign governments default on their bonds within the next year, compute the payoffs assuming the CDS had first-to-default and third-to-default structures, respectively, assuming the recovery rate on each bond is 50%.
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