Default Risk Arises from the Fact That

question 12

Multiple Choice

Default risk arises from the fact that

• A)borrowers differ in their ability to repay in full the principal and interest required by a loan agreement.
• B)the tax treatment of financial instruments differs.
• C)it is inherently riskier to wait for a capital gain than to receive an immediate interest payment.
• D)interest rates are far more likely to go up than to go down.

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Definitions:

Mildest Recession

A period of economic downturn that is less severe in terms of duration and decrease in GDP compared to typical recessions.

Strongest Recovery

The phase in an economic cycle where an economy experiences the most rapid and robust return to growth following a downturn.

Weakest Recovery

Typically refers to a period of slow or minimal economic growth following a recession or economic downturn.

Rapid Population Growth

A significant increase in the population of an area in a short period, which can lead to challenges such as resource depletion, unemployment, and environmental degradation.