Question

What is the default risk​ premium? A.The additional yield that an investor requires for holding a...

What is the default risk​ premium?

A.The additional yield that an investor requires for holding a bond with some default risk.

B.The yield that an investor requires for holding a bond during the time of a recession.

C.The return that an investment is expected to yield.

D.The theoretical rate of return of an investment with zero risk.

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Answer #1

Option A is correct.

All securities that exist in the financial Market has many risks attached to it. One of the risk is Default Risk. Defualt Risk is the the risk that the issuer of security will not be able to pay back the money and he will default the scheduled payment. The investor requires the premium on takingn such risks, called Defualt Risk Premium.

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