The Best Way to Measure the Default Risk Premium That

question 33

Multiple Choice

The best way to measure the default risk premium that a borrower is paying is to

• A)look at the borrower's bond rating as reported by Moody's Investors Services.
• B)look at the borrower's bond rating as reported by Standard and Poor's Bond Rating Services.
• C)compare the interest rate the borrower pays with the risk-free premium, usually represented by the rate on US Treasury Securities.
• D)look at the profitability of the lender relative to its industry.

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