Lenders are typically compensated for the risk of default with
A)Shares of the company's profits.
B)Dividend payments.
C)Bonds.
D)Above-average interest rates.

Question

Quizplus · Accepted Answer

Lenders are compensated for the risk of default with higher interest rates on their loans. This compensates them for the increased risk they take on by lending to a borrower with a higher probability of default. Shares of profits, dividend payments, and bonds do not inherently compensate lenders for default risk.

Lenders Are Typically Compensated for the Risk of Default with