Asked by
Mohammad Abdullah Ansari
on Dec 20, 2024Verified
Which of the following risk premiums apply to both corporate securities and federal government securities?
A) Default risk only
B) Liquidity risk only
C) Maturity risk only
D) Both default risk and liquidity risk
E) Both liquidity risk and maturity risk
Liquidity Risk
The risk of loss to an investor from the inability to sell a security to another investor at a price close to its true value.
Maturity Risk
The risk associated with the time until the bond or other fixed income instrument pays its principal back. It can affect interest rates and investment value.
Default Risk
The likelihood that a borrower will fail to meet the obligations of paying back debt, impacting the safety of the investment.
- Classify the diverse types of risk premiums (default, maturity, liquidity) and assess their impact on interest rates.
Verified Answer
PK
Learning Objectives
- Classify the diverse types of risk premiums (default, maturity, liquidity) and assess their impact on interest rates.