CFA Practice Question

There are 266 practice questions for this study session.

CFA Practice Question

Which of the following statements is not true with respect to analyzing the credit risk of a fixed income security?
A. Credit spread risk is the risk that the general credit spread over some benchmark rate will increase.
B. Downgrade risk is the risk that the required yield on the issue will drop.
C. Credit risk is the risk that the interest or principal due will not be paid on time.
Explanation: Whenever the required yield on any security drops, it is a good thing. Downgrade risk is when the issuer's credit rating is downgraded, in which case the required yield will increase.

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