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Basic Question 5 of 16
Which equation is correct?
B. Loss given default = Recovery rate - 1.
C. Recovery rate = Loss given default - 1.
A. Loss given default + Recovery rate = 1.
B. Loss given default = Recovery rate - 1.
C. Recovery rate = Loss given default - 1.
User Contributed Comments 2
| User | Comment |
|---|---|
| ashish100 | Tricky tricky.... |
| doubleling | According to investopedia: The recovery rate enables an estimate to be made of the loss that would arise in the event of default, which is calculated as (1 - Recovery Rate). Thus, if the recovery rate is 60%, the loss given default or LGD is 40%. |
I just wanted to share the good news that I passed CFA Level I!!! Thank you for your help - I think the online question bank helped cut the clutter and made a positive difference.
Edward Liu
Learning Outcome Statements
describe the seniority rankings of debt, secured versus unsecured debt and the priority of claims in bankruptcy, and their impact on credit ratings
CFA® 2025 Level I Curriculum, Volume 4, Module 16.