Question #34
Reading: Reading 28 Credit Analysis Models
PDF File: Reading 28 Credit Analysis Models.pdf
Page: 13
Status: Correct
Correct Answer: B
Question
Upward sloping credit curve is most likely an indication of:
Answer Choices:
A. expectations of a recession
B. upward sloping benchmark curve
C. expectations of an economic expansion
Explanation
Upward sloping credit curve indicates widening of spread as debt maturity increases. This
would be consistent with expectations of higher probability of default (or lower recovery
rate) in the longer-term, which would be consistent with expectations of a recession.