Credit Risk Puts Both the Principal Loaned and Expected Interest

Multiple Choice

Credit risk puts both the principal loaned and expected interest payments at risk.As a result, FIs issue financial claims that have a risk-return profile with:

A) high probability of fixed upside return
B) high probability of large downside risk
C) low probability of large downside risk
D) both high probability of fixed upside return and low probability of large downside risk