The probability that a bond issuer cannot pay back is called:

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Multiple Choice

The probability that a bond issuer cannot pay back is called:

Explanation:
The main idea is the chance a borrower won’t repay what they owe. That specific risk is called default risk. It measures the probability that the bond issuer cannot make the required interest payments or repay the principal when it’s due, which can lead to a loss for the investor. Market risk refers to price moves caused by overall market conditions, not the issuer’s ability to pay. Liquidity risk is about how easy it is to sell the bond without large price changes. Credit risk is related, as it concerns the borrower's ability to repay, but the precise probability of nonpayment is best described as default risk.

The main idea is the chance a borrower won’t repay what they owe. That specific risk is called default risk. It measures the probability that the bond issuer cannot make the required interest payments or repay the principal when it’s due, which can lead to a loss for the investor.

Market risk refers to price moves caused by overall market conditions, not the issuer’s ability to pay. Liquidity risk is about how easy it is to sell the bond without large price changes. Credit risk is related, as it concerns the borrower's ability to repay, but the precise probability of nonpayment is best described as default risk.

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