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Basic Question 3 of 5
For a 10-year corporate bond the probability of default is estimated to be 2%. The expected recovery rate in the event of default is 70%. What is the expected loss?
B. 0.6%
C. 0.686
A. 1.4%
B. 0.6%
C. 0.686
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Learning Outcome Statements
explain how the phase of the business cycle affects credit spreads and the performance of credit-sensitive fixed-income instruments;
explain how the characteristics of the markets for a company's products affect the company's credit quality;
CFA® 2025 Level II Curriculum, Volume 6, Module 37.