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%