Final answer:
The rate of return that lenders require for the money they lend by purchasing bonds, including the one Abigail bought from Nuts Bolts Hardware Store, is referred to as the bond yield. It incorporates a risk premium that reflects the borrower's creditworthiness.
Step-by-step explanation:
Abigail lent money to Nuts Bolts Hardware Store by purchasing bonds issued by the store. The rate of return that she and the other lenders require is referred to as the bond yield. This rate is composed of three main components: the compensation for postponing consumption, an adjustment for expected inflation, and a risk premium associated with the borrower's ability to repay. Bonds with a higher risk of default, known as high-yield or junk bonds, often offer a higher rate of return to compensate for this increased risk. It is important to note that there is a relationship between the expected rate of return, risk, and the actual rate of return, and this must be analyzed carefully when considering the purchase of a bond.