Answer-first summary for fast verification
Answer: 1.00%
The **dollar default rate** is calculated as the **par value of defaulted bonds divided by the total par value outstanding** in the category. \[ \text{Dollar default rate} = \frac{10\text{ million}}{1{,}000\text{ million}} = 0.01 = 1.00\% \] The trading price at default is not used for the dollar default rate; it would be relevant to recovery calculations.
Author: Manit Arora
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Q-198.3. In a given credit rating category, there were 100 corporate bonds outstanding during the year with a total par value of $1.0 billion and a market value of $800 million. Among the group, only one of the bonds defaulted; its par value was $10.0 million and its trading price at the time of default was $4.0 million. What was the DOLLAR DEFAULT RATE for the rating category during the year?
A
0.40%
B
0.50%
C
1.00%
D
1.25%
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