CFA Practice Question

There are 252 practice questions for this study session.

CFA Practice Question

Assume a hazard rate of 3% for the first interest payment of $50 (year 1), and a hazard rate of 5% for the second and final interest and principal payment of $1050 (year 2). The recovery rate is 40%.

What is the probability of receiving $50 in year 1 and then $1050 in year 2?

A. 92%.
B. 92.15%.
C. 93.55%.
Correct Answer: B

97% x 95% = 92.15%.

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