BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -The maturity premium represents that portion of the yield that compensates the investor for the additional waiting time or the lender for the additional time it takes to receive repayment in full.

Detailed explanation-2: -An asset’s risk premium is a form of compensation for investors. It represents payment to investors for tolerating the extra risk in a given investment over that of a risk-free asset. Similarly, the equity risk premium refers to an excess return that investing in the stock market provides over a risk-free rate.

Detailed explanation-3: -What is a Default Risk Premium? A default risk premium is effectively the difference between a debt instrument’s interest rate and the risk-free rate. The default risk premium exists to compensate investors for an entity’s likelihood of defaulting on their debt.

Detailed explanation-4: -Default risk premium – This is the additional maturity risk premium paid by a borrower to account for the risk that the borrower defaults and does not pay back the money loaned. Most corporations are charged a default risk premium.

Detailed explanation-5: -Risk premium on lending is the interest rate charged by banks on loans to private sector customers minus the “risk free” treasury bill interest rate at which short-term government securities are issued or traded in the market.