Default Risk Is

question 118

Multiple Choice

Default risk is:

• A) the risk that the lender will not pay the face value of the bond on the maturity date.
• B) the risk that a stock will become worthless.
• C) the risk that the borrower will renegotiate the maturity date on a bond.
• D) the risk that the borrower will not pay the face value of the bond on the maturity date.
• E) the risk that a stock will lose value.

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Definitions:

Straight-Line Method

A technique for determining depreciation or amortization by uniformly spreading an asset's cost throughout its lifespan.

Amortizes

The process of gradually writing off the initial cost of an asset over a period, effectively spreading the cost over its useful life.

Accrued Interest

Accrued interest is the interest on a loan or bond that has accumulated since the principal investment or last payment period but has not yet been paid.

Interest Expense

The cost incurred by an entity for borrowed funds, typically presented as an expense on the income statement.