a higher default risk premium indicated investors expect a ( blank ) credit risk on the...

a higher default risk premium indicated investors expect a ( blank ) credit risk on the corporate bonds

the difference between nominal and real return is

Solutions

Expert Solution

1. Higher

The Default risk premium is the Additional premium that the bond carries according to the risk of the default, If the bond is low rated, then it carries higher default risk premium and in case the bond is Highly rated, the bond will have lower default rating. This is because the company needs to compensate the investor for additional risk they are taking.

2. Inflation

The Difference between the Nominal and the real return is the Inflation, Nominal return takes into account the actual return and return that is lead by inflation into acccount while real account takes only actual return. The difference between the two is of the inflation.

jeff jeffy answered 1 year ago

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