The Average Default Rate in the Economy Is 1

question 15

Multiple Choice

The average default rate in the economy is 1.5% of the face value of outstanding debt defaults per year. What is the average time between defaults if there are 1000 firms alive on average?

• A) 20 days
• B) 24 days
• C) 38 days
• D) 41 days

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Definitions:

Purchase-Money Security Interest

A legal claim granted to lenders over items purchased, serving as collateral for the loan used to purchase the goods.

Possession Of Collateral

Holding or control over property or assets pledged as security for a loan or obligation.

Private Sale

A transaction of goods or property conducted directly between individuals or parties without the involvement of a public auction or open market.

Public Sale

The process of selling goods or assets to the highest bidder in an open and public manner.