Default Premium

What Does Default Premium Mean?
The additional amount a borrower must pay to compensate the lender for assuming default risk.

Investopedia explains Default Premium
The default premium is paid by companies with lower grade bonds or by individuals with poor credit. As an illustration, companies with poor financials will tend to compensate investors for the additional risk by issuing bonds with high yields. Individuals with poor credit must pay higher interest rates in order to borrow money from the bank.

Related Terms

Assumable Mortgage
Default
Default Probability
Default Risk
Premium
Sovereign Bond
More Related Terms

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