Hull: Fundamentals of Futures and Options Markets, Ninth Edition
Chapter 23: Credit Derivatives
Multiple Choice Test Bank
1. Suppose that the cumulative probability of a company defaulting by years one, two, three and
four are 3%, 6.5%, 10%, and 14.5%, respectively. What is the probability of default in the fourth
year conditional on no earlier default?
A. 4.5%
B. 5.0%
C. 5.5%
D. 6.0%
2. What is the number of companies underlying the CDX NA IG index?
A. 50
B. 75
C. 100
D. 125
3. What is the number of companies underlying the iTraxx index?
A. 50
B. 75
C. 100
D. 125
4. What is the rating of the companies underlying the iTraxx index?
A. A or above
B. BBB or above
C. BB or below
D. BBB or below
