Six months ago, Evangeline purchased a seven-year bond paying 9.5% annual interest. The company she loaned the money to recently failed and does not have any assets that can be sold to pay off debt. This scenario describes _____ risk.

Question

Quizplus · Accepted Answer

This scenario describes default risk, which is the risk that the borrower will not be able to repay the loan or interest as scheduled. When a borrower defaults, the lender may not receive any or all of the principal or interest payments.

Six Months Ago, Evangeline Purchased a Seven-Year Bond Paying 9