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math 3650- midterm extra questions from hw

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The Board of Directors sets the risk tolerances of the Corporation. In addition to the underlying economics (i.e. the risks to the underlying cash flows), what other factors may influence the risk tolerances they set?
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Terms in this set (14)
Credit risk (also called default risk) is the risk that borrowers will not repay their loans
US Treasuries have no default risk- they are risk free investments.
All other investments have a risk of default, and investors are compensated for taking this risk by earning a risk premium- a higher interest rate.
The difference between yields on corporate bonds and Treasury yields is called the default spread or credit spread.
Default spreads rose to levels previously unseen in late 2008 in the financial crises.