The fact that borrowers sometimes default on their loans by declaring bankruptcy is directly related to the characteristic of a bond called
A)credit risk.
B)interest risk.
C)term risk.
D)private risk.

Question

Quizplus · Accepted Answer

Credit risk is the risk that the borrower will default on their loan or bond, including declaring bankruptcy. Interest risk refers to the risk that interest rates will change and affect the value of the bond. Term risk refers to the risk of fluctuations in the bond's price due to changes in the time to maturity. Private risk is not a commonly used term in finance.

The Fact That Borrowers Sometimes Default on Their Loans by Declaring