Question #4
Reading: Reading 39 Economics and Investment Markets
PDF File: Reading 39 Economics and Investment Markets.pdf
Page: 2
Status: Correct
Correct Answer: B
Question
Jeff Dentmat is expecting overall credit spreads to narrow over the next few years. Which of the following conclusions can Dentmat most appropriately make?
Answer Choices:
A. Risky bonds will outperform risk-free bonds
B. Government bonds will outperform low-rated corporate bonds
C. High rated corporate bonds will outperform low-rated corporate bonds
Explanation
When credit spreads narrow, lower rated bonds outperform higher rated bonds.