Answered

1. What does "default" refer to?

A. the failure to pay back a loan
B. the amount of money borrowed
C. the price paid for the use of borrowed money
D. the ability to be used as, or directly converted to, cash



Answer :

GinnyAnswer

Final answer:

Default signifies failure to repay a loan. Credit risk and collateral play crucial roles in managing default consequences.


Explanation:

Default refers to the failure to pay back a loan as agreed upon. It can be either total non-repayment, partial repayment, or delayed repayment. In case of default, the lender may face a loss, and the borrower may find it challenging to borrow in the future.

Credit risk is the likelihood of a borrower defaulting on a loan, impacting lenders. Collateral can serve as security for a loan, giving lenders a means to recover if the borrower defaults.


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