- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 29. Credit Analysis Models
- Subject 6. The Term Structure of Credit Spreads
CFA Practice Question
If we observe an increasing default probability but decreasing benchmark rate over longer maturity periods, we will likely see a ______ credit spread curve.
B. flat
C. downward-sloping
D. uncertain
A. upward-sloping
B. flat
C. downward-sloping
D. uncertain
Correct Answer: A
While the term structure of yields is hard to tell, the credit spread curve will likely be upward-sloping because of the increasing default probability.
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