- CFA Exams
- CFA Level I Exam
- Study Session 13. Fixed Income (2)
- Reading 35. Credit Analysis Models
- Subject 2. Credit scores and credit ratings
CFA Practice Question
Which two tend to move together?
II. business cycle.
III. default probabilities of corporate debt.
I. credit ratings.
II. business cycle.
III. default probabilities of corporate debt.
A. I and II
B. II and III
C. I and III
Explanation: Rating agencies may try be motivated to keep their ratings stable over time.
User Contributed Comments 3
| User | Comment |
|---|---|
| janis36 | I thought 'together' means in the same direction. Understood now. |
| Lt2201 | This is wrong. Default probabilities of corporate debt drop as the business cycle improves, vice versa. |
| jyoti | moving together does not mean moving to the same direction. It simply means when one thing moves, another thing will move. II and III will move together while credit ratings are relatively stable (partly because it's a more subjective measure). |