In a recent report on bond recovery rates and recovery models, Caleb McAlister, a junior portfolio assistant, reads the following statements:
- The presence of vulture funds increases recovery rates.
- Greater firm borrowings lead to higher recovery rates.
- Using constant recovery rates tends to overestimate a firm's true credit VaR.
- Both beta distribution and conditional recovery modeling allow for samples with 0% or 100% recovery.
McAlister is suspicious about the accuracy of some of the statements. Which of the statements are least accurate?
A. I, III and IV.
B. II and IV.
C. II, III and IV.
D. I and III.
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