Credit default swap -question

[crazybrab]

OK, I need to solve this question, and I am completely lost:

An "A" rated company wants to issue a new bond with a maturity of 1st July 2009. (SDT:01/07/07). This new bond has a coupon and CDS for this company is trading at an annual premium of 85bps. Compute the bond's fair price value. Assume that swap spreads are a constant 40bps in all maturities."

If you could enlighten me, that would be a great help (I'm a complete newbie to CDS). How exactly would I interpret the annual premium of 85bps, to which swap does the 40bps refer to?

Thanks,

Crazybrab

 

[grantx]

Crazy,

What's wrong with Google?

See attachments. I'll be asking questions later.

Grant.

 

[grantx]

Crazy,

So, did the info help?

Grant.