SIE practice questioneasyCredit/default risk
If a bond issuer defaults on payment and does not pay interest or principal when due, the investor suffers from which risk?
- AInterest rate risk
- BCredit/default risk✓ Correct answer
- CMarket risk
- DPolitical risk
Explanation
Why B — Credit/default risk
Credit/default risk is the risk that a borrower will not be able to meet its obligations. Interest rate and market risk are about price fluctuations, while political risk is tied to governmental changes.
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