A Bond with Default Risk Will Always Have a ________

question 83

Multiple Choice

A bond with default risk will always have a ________ risk premium,and an increase in its default risk will raise the risk premium.

• A) positive
• B) negative
• C) unpredictable
• D) minimal

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Definitions:

Fixed Cost

are business expenses that remain constant regardless of the level of production or sales, such as rent or salaries.

Depreciation

The process of allocating the cost of tangible assets over their useful lives, reflecting wear and tear or obsolescence.

Discount Rate

The interest rate used to discount future cash flows to their present value, reflecting the time value of money.