Computation of present value of expected loss

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raviparikh

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This year a new section on Credit Analysis Models has been added in the syllabus. One of the topics is Present value of the expected loss.
I am unable to understand the computation involved in that case.
Can some please explain the concept?
Thanks
 
I’m with you on this one. Equally lost! Would really like it if someone could help out
 
Hey BigShark,
I figured out that PV (risk-free) = CF/(1+rf)^n while PV(risky) = CF/(1+total yield)^n
My confusion is that the formula for PV(risky) is slightly different in the official CFA book and the one by Schweser. Schweser uses PV(risky) = PV(risk-free)/(1+total yield)^n
Hope it helps!
 
thats not the formula for risky, the Kaplan books comes up with weird values. The risk free formula is right but risky is wrong. Or is the book wrong? I dont get this either
 
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