The Default Risk Premium Is

question 87

Multiple Choice

The default risk premium is

• A)relevant only for securities issued by very small companies.
• B)the additional yield a saver requires for holding a risky instrument.
• C)zero for corporate bonds, but quite substantial for corporate stock.
• D)constant across the business cycle.

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Definitions:

Infrastructure

The basic physical and organizational infrastructure and services such as buildings, roads, and power facilities required for the functioning of a society or business.

Human Capital

The collective skills, knowledge, and other intangible assets of individuals that can be used to create economic value.

Surplus Labor

This term refers to the portion of the labor force which is not currently being employed to its full potential, often leading to unemployment or underemployment in an economy.

Agriculture

The science or practice of farming, including cultivation of the soil for the growing of crops and the rearing of animals to provide food, wool, and other products.