What to know
Identify the rule, formula, or decision criterion before reading the answer choices. CFA Level I distractors often use the right vocabulary with the wrong condition.
Fixed Income
14. Credit Risk practice questions
14. Credit Risk is part of CFA Level I Fixed Income. Fixed Income questions focus on bond cash flows, yield measures, duration, convexity, credit risk, securitization, and curve interpretation. Use this page to review the controlling ideas, then work through 7 questions with answer explanations and common traps.
Review the worked explanations before moving into adaptive practice. The app version can mix this topic with due reviews and weak related concepts.
Practice this topicHow to practice
Work each item under time pressure, then compare your reasoning with the step-by-step explanation and key takeaway.
Review signal
Missed questions should become scheduled reviews when the error comes from a concept gap, formula setup, or answer-choice trap.
Fixed Income
14. Credit Risk
A bond exposure is 10 million. The one-year probability of default is 2.0%, and loss given default is 40%. The expected loss over one year is closest to:
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14. Credit Risk
During a recession, credit spreads on lower-rated corporate bonds are most likely to widen because investors expect:
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14. Credit Risk
Loss given default is best described as:
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14. Credit Risk
A limitation of credit ratings is that they most likely:
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14. Credit Risk
A bond has a one-year probability of default of 2.0% and loss given default of 60%. The one-year expected loss is closest to:
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14. Credit Risk
If a corporate bond's credit spread widens while the benchmark yield is unchanged, the bond price will most likely:
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14. Credit Risk
A bond's rating is unchanged, but its spread widens after investors require more compensation for sector liquidity risk. The risk realized is best described as:
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