Default Risk Arises from the Fact That

question 6

Multiple Choice

Default risk arises from the fact that

• A) borrowers differ in their ability to repay in full the principal and interest required by a bond agreement.
• B) the bond price drops when interest rates rise.
• C) it is inherently riskier to wait for a capital gain than to receive an immediate interest payment.
• D) interest rates are far more likely to go up than to go down.

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Definitions:

Pulmonary Circuit

The pathway by which blood travels from the heart to the lungs to be oxygenated and then back to the heart.

Systemic Circuit

The part of the cardiovascular system that carries oxygenated blood away from the heart to the body and returns deoxygenated blood back to the heart.

AV Valves

Atrioventricular valves are valves in the heart that lie between the atria and the ventricles to prevent the backflow of blood during ventricular contraction.

Papillary Muscles

Muscular projections from the ventricular walls of the heart that attach to the cusps of the atrioventricular valves via the chordae tendineae and prevent valve inversion.