A Promise to Accept a Lesser Sum in Satisfaction of a Greater

question 30

True/False

A promise to accept a lesser sum in satisfaction of a greater sum will be enforceable if it is contained in a deed.

---

Definitions:

Inflation Premium (IP)

The premium added to the real risk-free rate of interest to compensate for the expected loss of purchasing power. The inflation premium is the average rate of inflation expected over the life of the security.

Default Risk Premium (DRP)

The additional yield that investors demand to compensate for the risk of default by the issuer of a bond beyond the risk-free rate.

Liquidity Premium (LP)

Liquidity Premium refers to the extra return investors demand to compensate for investing in securities with low liquidity or those difficult to sell quickly at market value.

Real Risk-free Rate

The rate of return on a risk-free investment, after adjusting for inflation. It represents the true purchasing power gained from investing.