When Economists Refer to Default Risk on a Debt Instrument

question 51

Multiple Choice

When economists refer to default risk on a debt instrument, they are referring to

• A)the interest rate on the instrument minus the tax liability on that interest.
• B)the risk that borrowers will not repay all or part of their obligations.
• C)the risk that lenders will insist that borrowers repay the obligation before the maturity date.
• D)the risk that lenders will insist that borrowers pay more than the agreed upon interest rate.

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Definitions:

Lower Control Limit

The threshold below which the process output is considered to be statistically out of control in a control chart.

Packaging Process

A series of operations involved in designing and producing containers or wrappings for transporting, storing, and selling products.

Probability

The likelihood of an event happening, measured on a scale from 0 to 1.