Andy Is a Gymnast Who Often Performs Better When a Large

question 176

Short Answer

Andy is a gymnast who often performs better when a large group of people are watching; Neil is a basketball player who performs well in practice but cannot seem to pull it together in front of a crowd. Both Andy and Neil are experiencing the phenomenon referred to as _____.

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Definitions:

Default Risk

Default risk is the chance that a borrower will be unable to make the required payments on their debt obligations.

Interest Rate Risk

The risk of loss to an investor from changes in the price of a bond that arise from changes in the market interest rate. Also called price risk and maturity risk.

Maturity Risk

Maturity risk pertains to the uncertainty and potential loss associated with holding a bond or other fixed-income investment until its maturity date.

Coupon

The percentage rate of interest a bond yields annually, based on its principal amount.