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Activity papers · Last updated October 2026

HKSI LE Paper 10: Credit Rating Services: free practice test

This is the paper for representatives and Responsible Officers carrying on Type 10 regulated activity (providing credit rating services), taken together with Papers 1 and 7. It covers credit and credit risk fundamentals, how credit rating agencies work and are regulated, the rating process, and ratings for corporates, banks, public sector enterprises, structured finance and sovereigns.

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About the Paper 10 exam

This is the paper for representatives and Responsible Officers carrying on Type 10 regulated activity (providing credit rating services), taken together with Papers 1 and 7. It covers credit and credit risk fundamentals, how credit rating agencies work and are regulated, the rating process, and ratings for corporates, banks, public sector enterprises, structured finance and sovereigns.

What's on the exam

Paper 10
Credit as a Financial Discipline
6 key facts
The Credit Rating Industry
6 key facts
The Credit Rating Process
6 key facts
Corporate Credit Ratings
6 key facts
Bank and NBFI Credit Ratings
6 key facts
Public Sector Enterprise Credit Ratings
5 key facts
Structured Finance Credit Ratings
6 key facts
Sovereign Credit Ratings
6 key facts

Each branch is a topic in the official outline. Members see every key fact on the full mind map. Read the free study guide →

How to pass the Paper 10 exam

  • 40 questions in 60 minutes is 90 seconds each.
  • You need 70%: 28 out of 40, so you can only miss 12.
  • Know the scales cold: investment grade runs to BBB- on the S&P and Fitch scales and to Baa3 on the Moody's scale, and lower grades are speculative grade.
  • For any issuer type (bank, corporate, sovereign), first ask whether the rating is standalone or includes uplift for support, and whether the rating is capped by a sovereign or country ceiling.

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Create a free account after the test: your score by topic, a mistakes bank, the complete study notes for the first topic, flashcards and the HKSI Key Numbers Sheet.

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What's in the premium Paper 10 prep

Premium Paper 10 prep is studied one topic at a time. Each step starts with that topic's key notes and flashcard deck, then its own question sets of 25, so you master one topic before you move to the next. When every topic is strong, the 6 full mock exams show you're ready.

3,000practice questions, every answer explained
6full-length mock exams, 50 questions each, timed
800flashcards with spaced repetition, sorted by topic
60comprehensive key notes across 8 topics

Your step-by-step study path

  1. 1
    Credit as a Financial Discipline8 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25
    Notes free with an account
  2. 2
    The Credit Rating Industry8 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25
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  3. 3
    The Credit Rating Process8 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25
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  4. 4
    Corporate Credit Ratings8 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25
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  5. 5
    Bank and NBFI Credit Ratings7 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25
    Premium
  6. 6
    Public Sector Enterprise Credit Ratings7 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25
    Premium
  7. 7
    Structured Finance Credit Ratings7 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25
    Premium
  8. 8
    Sovereign Credit Ratings7 key notes, 100 flashcards, then 375 practice questions in 15 sets of 25
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  9. Final step: 6 full mock exams50 questions each, timed like test day. Pass them, then book your exam.
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Read the complete Paper 10 study notes for “Credit as a Financial Discipline”

Our first full set of comprehensive notes, about 10 minutes of reading: What is credit? · Debt versus equity · Credit risk, default and the stages of deterioration · Credit risk versus market risk · Reading credit quality from financial statements · Debt capital markets and pricing, a worked exam example, the traps examiners use and a one-minute recap. Create a free account to read it and see how premium notes work before you decide.

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Study tools included

3,000 practice questions

3,000 exam-style questions per exam, organized topic by topic in sets of 25. Every answer explained, with the rule it comes from.

6 full mock exams

6 full-length timed mock exams per exam, with real question counts and time limits, so test day feels like practice day.

Exam Readiness Score

One 0 to 100 number that tells you when you're ready to book. Reach 80 and you're covered by our Pass Guarantee.

800 flashcards + spaced repetition

800 flashcards per exam, in a deck for each topic, that come back right before you'd forget them. Five minutes a day keeps every number fresh.

60 comprehensive key notes

60 key notes per exam, split across its topics and each explained in full: the concepts, worked exam examples, the traps examiners use and a quick recap. Your first set is free with an account.

Mind maps

See the whole exam on one screen: every topic and the facts under it.

Sample questions with answers

These are the questions in the free test above, with answers. Try the test first. You'll learn more by getting some wrong.

1. Which of the following best explains why debt is fundamentally different from equity as an investment?
Answer: Debt holders have a contractual claim on payments that ranks ahead of equity holders. A creditor's claim is contractual and fixed, and creditors rank ahead of shareholders in liquidation. Equity is the residual ownership claim, with voting rights but no fixed entitlement.
2. In credit risk analysis, a transition matrix is used to show:
Answer: The probability of a rating moving to a higher or lower grade over a period. A transition matrix shows the historical probability of a rating migrating to each other grade over a set period, such as one year. Recovery rates are measured separately, after default.
3. Under Schedule 5 to the Securities and Futures Ordinance (Cap. 571), providing credit rating services for carrying on a business in Hong Kong is:
Answer: Type 10 regulated activity. Type 10 is providing credit rating services. Representatives and Responsible Officers for Type 10 must pass Papers 1, 7 and 10, and licensed agencies are governed by the SFC Code of Conduct for Persons Providing Credit Rating Services.
4. On the S&P Global Ratings long-term scale, the lowest rating that still falls within investment grade is:
Answer: BBB-. On the S&P and Fitch scales, investment grade runs from AAA down to BBB-. Anything at BB+ or below is speculative grade. On the Moody's scale the equivalent cut-off is Baa3.
5. A licensed credit rating agency keeps its analysts out of fee negotiations with issuers. The main reason for this separation is:
Answer: To prevent commercial pressure from compromising analytical independence. The SFC Code of Conduct for Persons Providing Credit Rating Services and the IOSCO Code require separation of commercial and analytical functions to manage conflicts of interest and protect the independence of ratings.
6. A through-the-cycle rating approach aims to produce ratings that:
Answer: Remain broadly stable across the economic cycle, reflecting long-term creditworthiness. Through-the-cycle ratings filter out temporary swings in an issuer's condition and so are more stable. Point-in-time ratings reflect current conditions and migrate faster with new information.
7. An analyst divides a company's earnings before interest and tax (EBIT) by its interest expense. This measures:
Answer: Interest coverage. EBIT divided by interest expense is the interest coverage ratio: how many times the company's earnings can cover its interest bill. Leverage ratios, by contrast, compare debt with earnings or capital.
8. A bond's terms prohibit the issuer from taking on more senior debt unless it keeps leverage below a stated level. This type of restriction is a:
Answer: Negative covenant. Negative covenants restrict what an issuer may do, such as adding debt, selling assets or paying dividends, protecting bondholders' credit quality. Affirmative covenants require positive actions, such as providing audited financial statements.
9. In bank credit ratings, the standalone assessment measures a bank's creditworthiness:
Answer: Before any uplift for extraordinary external support, that is its intrinsic strength. Agencies such as Moody's (baseline credit assessment) and S&P (standalone credit profile) first rate the bank on its own merits, then add notches for group or government support to reach the final issuer rating.
10. Which factor is most central to the credit profile of an asset manager?
Answer: The stability of its fee-based revenues from assets under management. Asset managers typically carry little debt and earn steady fees on assets under management, so revenue stability and diversification drive credit quality. Reserve adequacy applies to insurers and lending margins to banks.
11. In Mainland China, a local government financing vehicle (LGFV) is best described as:
Answer: A company set up by a local government to raise funds, often for infrastructure, whose debt is not direct local government debt. LGFVs borrow in their own names on behalf of local governments, so the debt is technically corporate. Rating agencies therefore weigh the likelihood and capacity of support from the sponsoring government.
12. In a securitization, the first losses on the underlying assets are absorbed by the most junior tranche, protecting senior noteholders. This form of credit enhancement is:
Answer: Subordination. Subordination creates a waterfall of loss absorption: junior tranches absorb the first losses, then mezzanine tranches, so senior tranches can qualify for high ratings. Overcollateralization, excess spread and reserve funds are other enhancement tools.
13. Compared with a corporate bond rating, the rating assigned to a structured finance tranche is primarily an opinion on:
Answer: The expected loss on the tranche under the transaction's cash flow model. Structured ratings are model driven: agencies assess probability of default and loss given default at each rating level, given assumptions about collateral performance, credit enhancement and correlation. Corporate ratings focus on an obligor's overall creditworthiness.
14. Sovereign foreign-currency ratings are typically no higher than local-currency ratings because:
Answer: A sovereign can print its own currency to service local-currency debt but must obtain foreign exchange for foreign-currency debt. A government under stress can always create domestic currency, but servicing foreign-currency debt depends on earning or buying foreign exchange, which can be restricted. This is why agencies often assign a sovereign two ratings.
15. Rating agencies usually limit how far a company's foreign-currency rating can exceed the country ceiling mainly because of:
Answer: Transfer and convertibility risk: the government may restrict access to or transfer of foreign currency. Country ceilings reflect transfer and convertibility risk: in a crisis a government can stop companies converting or sending foreign currency abroad, even if they can pay. Agencies also rarely rate issuers above their sovereign, with limited exceptions.

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Paper 10 exam FAQ

How many questions are on the Paper 10 exam?

40 multiple-choice questions, with a time limit of 60 minutes. Format: closed book, computer-based.

What is the passing score for Paper 10?

70%.

How much does the Paper 10 exam cost?

HK$1,620 in Hong Kong (HK$2,070 at overseas Prometric centres). Fees change, so confirm with the HKSI Institute before you enrol.

Which languages is the Paper 10 exam offered in?

English or Traditional Chinese.

Where do I take the Paper 10 exam?

HKSI Institute computer-based test centre in Hong Kong, or Prometric centres outside Hong Kong.

Is this Paper 10 practice test free?

Yes. The 15-question practice test on this page is free, with an explanation for every answer and no signup. A free account also unlocks the complete study notes for the first topic. The full Paper 10 prep is Premium at HK$1,147 a month for this exam.

What's in the premium Paper 10 prep?

3,000 practice questions organized topic by topic (Credit as a Financial Discipline: 375; The Credit Rating Industry: 375; The Credit Rating Process: 375; Corporate Credit Ratings: 375; Bank and NBFI Credit Ratings: 375; Public Sector Enterprise Credit Ratings: 375; Structured Finance Credit Ratings: 375; Sovereign Credit Ratings: 375), 6 full-length timed mock exams of 50 questions, 800 flashcards and 60 comprehensive key notes split across all 8 topics, plus a mistakes bank and the Readiness Score.

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Exam details are summarized from the official candidate information available in October 2026. HKSI Institute changes formats and fees, so confirm with Hong Kong Securities and Investment Institute (HKSI Institute) before you book. HKSIMock is not affiliated with the HKSI Institute or the SFC.

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