When economists refer to default risk on a debt instrument, they are referring to
A)the interest rate on the instrument minus the tax liability on that interest.
B)the risk that borrowers will not repay all or part of their obligations.
C)the risk that lenders will insist that borrowers repay the obligation before the maturity date.
D)the risk that lenders will insist that borrowers pay more than the agreed upon interest rate.

Question

Quizplus · Accepted Answer

Default risk refers to the risk that borrowers will not repay all or part of their debt obligations. This is a key concern for lenders, as it affects their ability to recover their investment and earn a return on their lending.

When Economists Refer to Default Risk on a Debt Instrument