A security's default risk can be measured as:
A)the difference between the rate paid on the security and the rate paid on a default-free security,with all factors other than default risk being held constant.
B)the difference between the rate paid on the security and the rate paid on a bond,with all factors other than default risk being held constant.
C)the difference between the prime lending rate and the rate paid on a default-free security,with all factors other than default risk being held constant.
D)none of the above.

Question

Quizplus · Accepted Answer

The default risk of a security is typically measured by the spread between the yield on the security and the yield on a comparable default-free security, such as a government bond, with other factors held constant.

A Security's Default Risk Can Be Measured As