Default Risk Is the Risk That

question 39

Multiple Choice

Default risk is the risk that

• A) the lender will not pay the face value of the bond on the maturity date.
• B) a stock will become worthless.
• C) the borrower will renegotiate the maturity date on a bond.
• D) the borrower will not pay the face value of the bond on the maturity date.
• E) a stock will lose value.

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Definitions:

Break-Even Point

The level of production or sales at which total revenues equal total costs, resulting in no net loss or gain.

Variable Expenses

Expenses that change in proportion to the amount of goods produced, including materials and wages directly associated with manufacturing.

Break-Even Analysis

A financial calculation that determines the point at which total revenues equal total costs, indicating no profit or loss.

Variable Expenses

Costs that change in proportion to the level of activity or volume of output produced.