The market yield on a risky security is equal to the risk-free interest rate plus the risk premium. The higher the degree of default risk, the lower the risk premium.

Name: The market yield on a risky security is equal to the risk-free interest rate plus the risk premium. The higher the degree of default risk, the lower the risk premium.
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The higher the degree of default risk, the higher the risk premium, as investors demand more compensation for taking on additional risk.

The Market Yield on a Risky Security Is Equal to the Risk-Free