BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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High Cost Higher Risk
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High cost low risk
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Low cost high risk
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Low cost Low risk
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Detailed explanation-1: -The danger associated with borrowing money is called credit risk or default risk. If the borrower cannot repay the loan (it becomes default), the investors suffer from reduced income from loan repayments, interests, and principal. Creditors often experience an increment in costs for debt collection.
Detailed explanation-2: -Key Takeaways Bonds, such as government bonds, corporate bonds, municipal bonds, collateralized bonds, and zero-coupon bonds, are a common type of debt security.
Detailed explanation-3: -Credit Risk/Default Risk The government or company should repay the amount borrowed over a period with interest. The probability that the issuer of a bond or any other debt security may be unable to make timely payments of interest or repay the principal is referred to as credit risk/default risk.