Q580
A premium which reflects possibility of issuer who does not pay principal amount of bonds is called
A.
seasoned risk premium
B.
nominal risk premium
C.
default risk premium
AnswerD.
quoted risk premium
Answer: Option C
Solution
Answer: Option C
Solution:
A premium which reflects possibility of issuer who does not pay principal amount of bonds is called default risk premium. A default risk premium is effectively the difference between a debt instrument's interest rate and the risk-free rate.