• What is default risk? What is the predicted relationship between default risk and bond yields?

• Rank the following on the basis of default risk: Treasury bonds, investment-grade bonds, junk/high-yield bonds.

• What is the risk premium? Be able to calculate the risk premium for a given bond.

• How did risk premiums during the 2008-2009 recession compare to the 2001 recession? What is an explanation for this difference? (HW#7)

• What was the behavior of the risk premium in early 2020? What issues might explain the pattern of the risk premium during this period? (HW#7)

• What has been the trend in real interest rates since the 1980s? Is the trend in real interest rates good or bad for savers? Is it good or bad for borrowers? (HW#7)