The Default-Risk Premium

question 91

Multiple Choice

The default-risk premium:

• A) should vary directly with the bond's yield and inversely with its price.
• B) is less than 0 (zero) for a U.S. Treasury bond.
• C) should be lower for a highly speculative bond than for an investment-grade bond.
• D) should vary directly with the bond's yield and the bond's price.

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Definitions:

Equilibrium Price

The price at which the quantity of a product offered is equal to the quantity of the product in demand, leading to a stable market condition.

Deductible

In insurance, it is the amount paid out of pocket by the policyholder before an insurance provider will pay any expenses.

Health Care Demanded

Refers to the quantity of health care services that individuals are willing and able to purchase at a given price.

Managed-Care Organizations

Health insurance companies that provide medical care directly to the insured individuals through specific networks of doctors, hospitals, and other healthcare providers.