The Default Risk Premium Is

question 52

Multiple Choice

The default risk premium is

• A) relevant only for securities issued by very small companies.
• B) the additional yield a saver requires for holding a bond with some default risk.
• C) zero for corporate bonds, but quite substantial for corporate stock.
• D) constant across the business cycle.

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Definitions:

Relevant Costs

Costs directly related to a specific decision, which will change as a result of that decision.

Average Cost

The total cost of production divided by the number of goods produced, representing the cost per unit of output.

Marginal Cost

The financial outlay for creating one further unit of a good or service.

Extent Decisions

Decisions related to the scale or scope of an operation or project, often involving considerations of expansion or reduction.