The correct answer is C. default risk premium.
A default risk premium is a premium that investors demand in order to compensate for the risk that the issuer of a bond will not repay the principal amount of the bond or make the interest payments. The higher the default risk of the issuer, the higher the default risk premium that investors will demand.
A seasoned risk premium is the additional return that investors demand for investing in a security that has already been issued. The seasoned risk premium is higher than the initial risk premium because the security has a longer history of performance and investors have more information about the issuer’s creditworthiness.
A nominal risk premium is the additional return that investors demand for investing in a security that is not protected against inflation. The nominal risk premium is higher than the real risk premium because investors are also compensated for the risk that the purchasing power of their investment will decline due to inflation.
A quoted risk premium is the difference between the yield on a security and the risk-free rate of return. The quoted risk premium is not a true measure of risk because it does not take into account the default risk of the issuer.