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Basic Question 4 of 5

There are two series of outstanding senior bonds issued by a company, which has filed for bankruptcy. Bond A trades at 20% of par, and Bond B trades at 30% of par. Investor X owns $10 million of bond A and investor Y owns $10 million of bond B. They both own $10 million of CDS protection.

What is the recovery rate for the CDS contract of X's?

A. 20%.
B. 25%.
C. 30%.

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Colin Sampaleanu

Learning Outcome Statements

describe credit events and settlement protocols with respect to CDS;

CFA® 2025 Level II Curriculum, Volume 4, Module 30.