An Increase in the Default Premium

question 62

Multiple Choice

An increase in the default premium

• A)lowers the real interest rate and firms invest more.
• B)shifts the optimal investment schedule to the right.
• C)shifts the optimal investment schedule to the left.
• D)will prevent firms from defaulting on their loans.
• E)raises the safe credit market interest rate.

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Definitions:

Shift In Distribution

A change in the overall characteristics of a data set's distribution, such as its mean, variance, or shape, that deviates from a previously observed or expected pattern.

Rejection Region

In hypothesis testing, the range of values for which the null hypothesis is rejected, indicating that the observed data is highly unlikely under the null hypothesis.

Wilcoxon Rank Sum Test

A nonparametric test that compares two independent groups to assess if their populations have the same distribution.

Wilcoxon Rank Sum Test

This is a method in statistics, not based on parameter assumptions, used for comparing the mean ranks of two distinct samples to see if they differ.