Interest Rate DifferentialsThe Default Risk Premium at a Certain Point

question 10

Multiple Choice

Interest rate differentialsThe default risk premium at a certain point in time may be expressed by comparing the interest rates on:

• A)a Treasury bill and a Treasury bond
• B)a Treasury bill and a long-term corporate bond
• C)a Treasury bill and the commercial paper rate
• D)a risky security and a comparable maturity U.S.Treasury security

---

Definitions:

Interest Rate

The percentage at which interest is paid by a borrower for the use of money that they borrow from a lender.

Payday Loans

Short-term, high-interest loans that are typically due on the borrower’s next payday.

Active Duty Personnel

Active duty personnel refers to military members who are currently serving on a full-time basis in their military capacity.

Usury Law

Legal regulations that set maximum interest rates which can be charged on loans, aimed at protecting consumers from exorbitant rates.