Default premium

Definition:

A differential in promised yield that compensates the investor for the risk inherent in purchasing a corporate bond that entails some risk of default. Often the premium is measured as the yield over and above a government bond yield of similar coupon and maturity.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Cross-Sectional Ratio Analysis

A method of analysis that compares a firm's ratios with some chosen industry benchmark. The benchmark usually chosen is the average ratio value for all firms in an industry for the time period under... Read More

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