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Basic Question 1 of 11
According to the option analogy, the probability that the debt defaults at time T is equal to the probability that:
B. The asset's value falls below the face value of the debt at time T.
C. The asset's value becomes zero or less.
A. The asset's value falls below the present value of the debt at time t.
B. The asset's value falls below the face value of the debt at time T.
C. The asset's value becomes zero or less.
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I passed! I did not get a chance to tell you before the exam - but your site was excellent. I will definitely take it next year for Level II.
Tamara Schultz
Learning Outcome Statements
explain structural and reduced-form models of corporate credit risk, including assumptions, strengths, and weaknesses;
CFA® 2024 Level II Curriculum, Volume 4, Module 31.