Default risk is measured by large traders, managers and investors with help of

A. sinking analysis

B. analyzing financial ratios

C. portfolio scenario value

D. automated machine analysis

Answer: Option B

Solution(By Examveda Team)

Default risk is measured by large traders, managers and investors with help of analyzing financial ratios. Default risk is the chance that a company or individual will be unable to make the required payments on their debt obligation. Lenders and investors are exposed to default risk in virtually all forms of credit extensions. A higher level of risk leads to a higher required return, and in turn, a higher interest rate.