The Default Risk Premium Reflects the Fact That ____

question 69

Multiple Choice

The default risk premium reflects the fact that ____.

• A) the premium remains constant over time
• B) there is a positive relationship between risk and maturity
• C) there is a positive relationship between default risk and required returns
• D) the premium varies depending on the time to maturity

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Definitions:

Operating Cycle

The duration of time from the acquisition of goods for inventory to the sale of the goods and the collection of payment.

Inventory Turnover

A measure of how quickly a company sells and replaces its stock of goods during a certain period, indicating efficiency in managing inventory.

Receivables Turnover

A measure of a company's efficiency in collecting its sales on credit, calculated by dividing sales by average accounts receivable.

Payables Turnover

A financial ratio that measures how quickly a company pays its suppliers by comparing net credit purchases with the average accounts payable over a period.