Possibility of nonpayment by the bond issuer

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Reference no: EM132018968

1. The _____________ premium is that portion of a nominal interest rate or bond yield that represents compensation for the possibility of nonpayment by the bond issuer.

A. default risk

B. liquidity

C. interest rate risk

D. taxibility

E. inflation

2. You currently own a one-year call option on RCI stock. The current stock price is $51.28 and the risk-free rate of return is 2.75 percent. Your option has a strike price of $50 and you assume the option will finish in the money. What is the current value of your call option?

$1.20

$2.59

$2.62

$3.13

$1.28

Reference no: EM132018968

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