ECONOMICS
SAVING AND INVESTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the potential that you will not get your money back once it is invested.
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fear that inflation will grow faster than the interest you earn.
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fear that you cannot earn enough money to meet your goals.
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the potential that you will quit saving.
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Detailed explanation-1: -Default risk is the risk that a lender takes on in the chance that a borrower will be unable to make the required payments on their debt obligation. Lenders and investors are exposed to default risk in virtually all forms of credit extensions.
Detailed explanation-2: -Default probability, or probability of default (PD), is the likelihood that a borrower will fail to pay back a certain debt. For businesses, probability of default is reflected in the company’s credit ratings. For individuals, a credit score is one gauge of default risk.
Detailed explanation-3: -#4 – Credit Risk The issuer of the bond may face financial difficulties due to which it may not be able to pay the interest or principal to the bond investors, thus, defaulting on its obligations.
Detailed explanation-4: -Default risk is the chance that borrowers will stop making monthly payments on their loans as outlined in their lending agreements. This possibility is also sometimes referred to as credit risk, and it’s something every lender or ratings agency has to consider when evaluating an individual or business.
Detailed explanation-5: -Default risk (or credit risk) of a bond refers to the risk that a bond issuer will default on any type of debt by failing to make payments which it is obligated to do. The risk is primarily that of the bondholder and includes lost principal and interest, disruption to cash flows, and increased collection costs.