Credit Risk Is the Risk That

question 86

Multiple Choice

Credit risk is the risk that

• A) an instrument's price or value will change.
• B) the company itself will not be able to fulfill its obligation.
• C) one of the parties to the contract will fail to fulfill its obligation and cause the other party loss.
• D) cash flow will change over time.

---

Definitions:

Explicit Costs

Costs that involve direct monetary payment by a business to purchase or maintain resources.

Usury Law

Legal regulations that set maximum interest rates that can be charged on loans to protect consumers against excessively high rates.

Equilibrium Interest Rate

The interest rate at which the demand for money in an economy equals the supply of money, maintaining a balance without excess surplus or shortage.

Market Equilibrium

The state in which market supply equals market demand, leading to price stability.