Based on your understanding of bond ratings and bond-rating criteria, which of the following statements is true? a. During an economic recession and in a pessimistic environment, the yield spread between US government bonds and corporate bonds could be higher than during good economic times. b. During a period of economic growth and in an optimistic environment, the yield spread between US government bonds and corporate bonds could be higher than during an economic recession and a pessimistic environment.

Question

Nico Stephenson

Business

3 September, 19:47

Based on your understanding of bond ratings and bond-rating criteria, which of the following statements is true? a. During an economic recession and in a pessimistic environment, the yield spread between US government bonds and corporate bonds could be higher than during good economic times. b. During a period of economic growth and in an optimistic environment, the yield spread between US government bonds and corporate bonds could be higher than during an economic recession and a pessimistic environment.

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Answers (1)

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Joseph Franco · Answer 1

Statements "A" is true.

Explanation:

During a financial recession and a cynical domain, the yield spread between government securities and corporate securities could be higher than during great monetary occasions. This is because the grounds that during a recession, corporate securities would convey more hazard, (for example, higher default chance) than during great monetary occasions. To make up for this extra hazard, financial specialists would request more returns.