CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

Consider a corporate bond. Per 100 of par value, its exposure is 96, and recovery is 50. The probability of default (POD) is 0.5%. What is the expected loss due to credit risk?
A. 0.15
B. 0.21
C. 0.23
Explanation: The Loss given default (LGD) per 100 of par value is exposure - recovery = 96 - 50 = 46. The expected loss is LGD x POD = 46 x 0.5% = 0.23.

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