Challenge yourself today by solving this question taken directly from our Advanced Credit Risk Professional Certificate course!
Q. The price of a risk-free, 5-year zero coupon bond with par $100 is $80. A corporation has issued a 5-year zero coupon bond with par value of $100. The price for this bond is $72. Assume that in the event of default by the corporation, the corporate bond will be worth zero. The bond prices imply a probability that the corporation will default at or before 5 years, of:
A) 0.9
B) 0.1
C) 0.72
D) 0.8
Reveal the Answer
The answer is B) 0.1
What is the Advanced Credit Risk Professional Certificate?
The Advanced Credit Risk Professional Certificate gives you a comprehensive survey of credit risk modeling, valuation and credit risk management techniques. You will develop models for assessing the value and risk of portfolio credit default swaps, tranche credit index products and various types of collateralized debt obligations.
About The New York Institute of Finance
The New York Institute of Finance (NYIF) is a global leader in training for financial services and related industries. NYIF courses cover everything from investment banking, asset pricing, insurance and market structure to financial modeling, treasury operations, and accounting. The New York Institute of Finance has a faculty of industry leaders and offers a range of program delivery options, including self-study, online courses, and in-person classes.
Started by the New York Stock Exchange in 1922, NYIF now trains 50,000 professionals online and in class, in over 120 countries. Its US customers include the SEC, the Treasury, Morgan Stanley, Bank of America and most leading worldwide banks. In 2017 NYIF launched two new financial designations, the Chartered Financial Risk Engineer™ and the Chartered Investment Banking Analyst™.
“It was a wonderful experience…I have enjoyed attending classes offered by great professionals & trying to keep up to a high level of learning that involves big effort and study.”- Abraham Mateos Gallego