- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 29. Credit Analysis Models
- Subject 4. Valuing Risky Bonds in an Arbitrage-Free Framework
CFA Practice Question
For a floating-rate note, ______ is commonly used to measure its credit risk.
B. discount margin
C. exposure yield
A. credit spread
B. discount margin
C. exposure yield
Correct Answer: B
The discount margin for floating rate notes is similar to the credit spread for fixed-coupon bonds. The discount margin can also be calculated using an arbitrage-free valuation framework.
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