An example of default risk is
A)a borrower refusing to make his car payments.
B)a change in the interest rate such that a borrower pays off her mortgage loan early.
C)a change in the exchange rate such that an FI's foreign assets lose value in dollar terms.
D)an FI's inability to make payments without first selling long-term assets.

Question

Quizplus · Accepted Answer

Default risk refers to the risk that a borrower will not repay a loan as agreed. In this case, the borrower refusing to make car payments is an example of default risk. The other answer choices do not involve default risk.

An Example of Default Risk Is