Default risk is the risk that a borrower will not be able to pay the face value of the bond on the maturity date. This is different from credit risk, which is the risk that a borrower will default on any payment obligation.

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Default Risk Is

Question 51

Multiple Choice

Default risk is:

A) the risk that the lender will not pay the face value of the bond on the maturity date.
B) the risk that a stock will become worthless.
C) the risk that the borrower will renegotiate the maturity date on a bond.
D) the risk that the borrower will not pay the face value of the bond on the maturity date.
E) the risk that a stock will lose value.

Correct Answer: