Even the simplest kind of default as an independent random event poses difficulties. The correct formulas for the nominal return on a default free loan and the revisions to apply for a loan that may default follow from 2 assumptions. 1. A good now is better than a good later because survival from now to later is not sure. 2. Private loans occur only if the probability of default does not exceed an upper bound set by the reciprocal of the nominal return on a default free loan. This upper bound makes sense if and only if the nominal interest rate on a default free loan is positive. JEL E43 Interest Rates