Multiple Choice
Default risk arises from the fact that
A) borrowers differ in their ability to repay in full the principal and interest required by a loan agreement.
B) the tax treatment of financial instruments differs.
C) it is inherently riskier to wait for a capital gain than to receive an immediate interest payment.
D) interest rates are far more likely to go up than to go down.
Correct Answer:
Verified
Correct Answer:
Verified
Q7: Under the preferred habitat theory the shape
Q8: Unlike the segmented markets theory, the expectations
Q9: Under the preferred habitat theory, a flat
Q10: Interest and capital gains are taxed differently
Q11: The segmented markets theory<br>A)has difficulty explaining why
Q13: Suppose the private bond rating agencies ceased
Q14: If lenders anticipate no changes in liquidity,
Q15: Because savers are generally risk-averse<br>A)the long-run return
Q16: If the preferred habitat theory is correct,
Q17: Differences in the taxation of returns<br>A)only affect