Which of the following is usually used to define the recovery rate of a bond?
A. The value of the bond immediately after default as a percent of its face value
B. The value of the bond immediately after default as a percent of the sum of the bond's face value and accrued interest
C. The amount finally realized by a bondholder as a percent of face value
D. The amount finally realized by a bondholder as a percent of the sum of the bond's face value and accrued interest
A
The recovery rate for a bond is usually defined as the value of the bond immediately after a default as a percent of its face value. This is in spite of the fact that the bond holder's claim in the event of a default in many jurisdictions is the face value plus accrued interest.
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