"Default" Occurs When

question 141

Multiple Choice

"Default" occurs when

• A) bond issuers fail to make promised payments.
• B) corporations go bankrupt and stock becomes worthless.
• C) bond purchasers fail to pay full price for a bond.
• D) stocks are not federally insured.

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Definitions:

Present Value

The current worth of a future sum of money or stream of cash flows, given a specified rate of return.

Compound Interest

Interest that is computed on the original amount of a loan or deposit, incorporating all the interest accumulated from earlier periods.

Annuity Conditions

Terms that specify how an annuity is to be paid out, including timing, the potential for beneficiaries, and the calculation of payments.

Compounded

The process where the value of an investment increases because the earnings on an investment, both capital and interest, earn interest as time passes.