Credit Analysis - Present Value of Expected Loss Computation

Hi,

When computing the present value of expected loss (Reading 38), Schweser states:

“The computation of present value of expected loss uses continuously compounded interest rates”

However, when doing Online Tests I noted one example where PVEL was computed using “regular” compounding (Falmouth Case).

Is there any rule when to use which? Or is Schweser simply wrong?

Thanks for your feedback!

It appears that in the curriculum they always use continuously compounded rates for PVEL.

There’s nothing inherent in PVEL that dictates that you have to use continuously compounded rates, but that’s what they do.

As for the online test, ¿Quien sabe?