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Basic Question 9 of 11
Which statement is FALSE according to reduced-form models?
B. The default probability is different for the company's different types of debt.
C. The risk premium is dominated by the time value of money when the PV of the expected loss is less than expected loss.
A. If default occurs, different liabilities of a company's may have different loss rates.
B. The default probability is different for the company's different types of debt.
C. The risk premium is dominated by the time value of money when the PV of the expected loss is less than expected loss.
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Learning Outcome Statements
explain structural and reduced-form models of corporate credit risk, including assumptions, strengths, and weaknesses;
CFA® 2025 Level II Curriculum, Volume 4, Module 29.