What Is Meant by "Default Risk" in Bonds, and How

question 76

Essay

What is meant by "default risk" in bonds, and how do investors respond to it?

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Definitions:

Business Activities

Various actions undertaken by a company as part of its operation, including investing, financing, and operating activities.

Revenues

The income received by a business from its normal business operations, often from the sale of goods or services.

Transposition

An error in which the order of the digits is changed, such as writing $542 as $452 or $524.

Trial Balance

A bookkeeping worksheet in which the balances of all ledgers are compiled into debit and credit account columns to check for errors in the double-entry system.