The Spread Between the Interest Rates on Bonds with Default

question 101

True/False

The spread between the interest rates on bonds with default risk and default-free bonds is called the risk premium.

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Definitions:

Abrasion

The mechanical wearing away of rock surfaces by contact with sand and other solid rock particles transported by running water, waves, wind, ice, or gravity.

Transportation

In geology, the movement of sediments from one location to another by water, wind, or ice.

Pebble's Particle Size

The measure of the grain size of pebbles, generally used in geology to classify sediment grains between 2 and 64 millimeters in diameter.

Increases

An upward trend or a rise in quantity, size, number, or degree in a measurable process or variable.