The ________ compensates the investor for the additional risk that the loan will not be repaid in full.
A)default premium
B)inflation premium
C)real rate
D)interest rate

Question

Quizplus · Accepted Answer

A default premium is an additional amount of interest paid by the borrower to compensate the lender for the risk of default. This premium is designed to ensure that the lender receives a return on the investment even if the borrower defaults. The other choices (B) inflation premium, (C) real rate, and (D) interest rate are not specifically tied to compensation for default risk.

The ________ Compensates the Investor for the Additional Risk That