Explanation:
The dollar default rate is calculated as the par value of defaulted bonds divided by the total par value outstanding in the category.
The trading price at default is not used for the dollar default rate; it would be relevant to recovery calculations.
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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%