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PRMIA Exam 8010 Topic 4 Question 72 Discussion

Actual exam question for PRMIA's 8010 exam
Question #: 72
Topic #: 4
[All 8010 Questions]

What ensures that firms are not able to selectively default on some obligations without being considered in default on the others?

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Suggested Answer: A

It is the cross-default clauses in debt agreements that generally provide that a default on one obligation is considered a credit event applying to all debts of the obligor, and therefore we are able to deal with credit risk at the borrower level, and not at the level of the individual security. It also helps avoid situations where borrowers can selectively default on some obligations while continuing to service others. Therefore Choice 'a' is the correct answer. The other choices are incorrect.


by Marta at Jun 13, 2025, 11:44 PM

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Julio
2 days ago
I remember practicing a question about debt covenants, and I think cross-default clauses were mentioned as a way to prevent selective defaults.
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Bernardine
8 days ago
I think cross-default clauses are really important because they link all obligations together, but I'm not completely sure if that's the only mechanism.
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Alyce
13 days ago
The bankruptcy code seems relevant here, but I'm not sure if that's the full answer. I'll need to think through the other options as well to be sure.
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Joaquin
19 days ago
I'm pretty confident the answer is A. Cross-default clauses are designed to prevent firms from defaulting on some obligations without being considered in default on others.
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Reynalda
24 days ago
Okay, I think I've got this. Cross-default clauses in debt covenants are what ensure firms can't selectively default. That makes sense to me.
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Mozell
29 days ago
Hmm, I'm a bit unsure about this one. I know cross-default clauses have something to do with it, but I'm not totally clear on the details. I'll have to review that concept.
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Shaniqua
1 month ago
This seems like a tricky question. I'll need to think carefully about the different options and how they relate to preventing selective default.
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Dorathy
4 months ago
Chapter 11? More like Chapter Bored, amirite? But seriously, the bankruptcy code is the answer.
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Scarlet
4 months ago
Exchange listing requirements? More like 'Exchange Listing Demands', am I right?
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Stanton
2 months ago
Haha, 'Exchange Listing Demands' does have a nice ring to it!
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Elenora
2 months ago
D) The bankruptcy code
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Theron
3 months ago
C) Exchange listing requirements
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Chun
3 months ago
B) Chapter 11 regulations
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Shannan
3 months ago
A) Cross-default clauses in debt covenants
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Lawana
4 months ago
But what about the bankruptcy code? Doesn't that also prevent selective default?
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Oneida
4 months ago
I agree with Dewitt. Cross-default clauses ensure firms can't selectively default.
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Dewitt
4 months ago
I think the answer is A) Cross-default clauses in debt covenants.
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Kimberely
5 months ago
Cross-default clauses? Sounds like a superhero team-up to me!
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Lorenza
5 months ago
The bankruptcy code is the way to go. It's like a one-stop shop for all your default needs!
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Rueben
3 months ago
B) Chapter 11 regulations
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Elena
4 months ago
The bankruptcy code covers all bases.
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Kathryn
4 months ago
A) Cross-default clauses in debt covenants
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