The risk that the debtor the entity that borrowed money


1. The risk that the debtor (the entity that borrowed money) does not repay part or all of its financial obligation is called:

Default risk

Credit spread risk

Downgrade risk

Credit deterioration risk

2. A $100 million deal can be divided into two classes: a $90 million senior class and a $10 million subordinate class. If there is $11 million of losses, what percentage of loss will the senior class realize?

0%

1%

1.11%

2.22%

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Financial Management: The risk that the debtor the entity that borrowed money
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