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:

Raising Revenue

The government's process of generating income through various means such as taxes, duties, and tariffs to fund public services and infrastructure.

Constitution

The fundamental principles and established precedents by which a state or other organization is governed, often codified as a written document.

House of Representatives

The lower chamber of the United States Congress, with members elected based on state populations to serve for two-year terms.

Foreign Policy

The strategies and decisions made by a country's government regarding its relations and interactions with other countries.