CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

There are two series of outstanding senior bonds issued by a company, which has filed for bankruptcy. Bond A trades at 20% of par, and Bond B trades at 30% of par. Investor X owns $10 million of bond A and investor Y owns $10 million of bond B. They both own $10 million of CDS protection.

What is the recovery rate for CDS contract of Y's?
A. 20%
B. 25%
C. 30%
Explanation: The cheapest-to-deliver obligation is Bond A. Recovery rate for both CDS contracts is 20%.

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