Hello there,
Just a quick clarification. When we calculate the present value of the expected losses, why are we using the risk free rate to discount the cash flows and not a rate that is adjusted for the risk of the bond defaulting?
Hello there,
Just a quick clarification. When we calculate the present value of the expected losses, why are we using the risk free rate to discount the cash flows and not a rate that is adjusted for the risk of the bond defaulting?