4. Fixed Income

Credit Analysis — Quiz

Test your understanding of credit analysis with 5 practice questions.

Practice Questions

Question 1

A bond yields 6.5\\% while a risk-free Treasury with similar maturity yields 2.0\\%. Assuming a recovery rate of 40\\% and ignoring time value of money, what is the approximate implied annual probability of default (PD)?

Question 2

In the KMV structural default model, the 'default point' at which a firm is considered to default is defined as:

Question 3

What does the G-spread measure in credit spread analysis?

Question 4

What is a key advantage of spread analysis compared to using credit ratings alone?

Question 5

In the expected loss formula $EL=EAD\times PD\times LGD$, which component does effective collateral primarily reduce?