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Consider the Case of a Simple One-Period Framework ×\times 1230% = 00171 = 1

Question 44

Multiple Choice

Consider the case of a simple one-period framework. If i = 12.30 per cent and k = 13.87 per cent, what is the risk premium on the corporate loan (round to two decimals) ?


A) 13.87% - 12.30% = 1.57%.
B) 13.87% ×\times 12.30% = 0.0171 = 1.71%.
C) 13.87% / 12.30% = 1.13%.
D) The risk premium equals k = 13.87 per cent.

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