Question at position 33 An increase in the riskiness of corporate bonds will ________ the yield on corporate bonds and ________ the yield on Treasury securities, everything else held constant.increase; increase increase; reducereduce; reducereduce; increase单项选择题
A
increase; increase
B
increase; reduce
C
reduce; reduce
D
reduce; increase

Question

Question at position 33 An increase in the riskiness of corporate bonds will the yield on corporate bonds and the yield on Treasury securities, everything else held constant.increase; increase increase; reducereduce; reducereduce; increase单项选择题

A

increase; increase

B

increase; reduce

C

reduce; reduce

D

reduce; increase

BlackTom AI · Accepted Answer

Higher default risk on corporate bonds raises the credit risk premium investors demand, so the yield on corporate bonds rises while Treasury yields fall as investors seek safety.

1) Relevant concepts:
- Bond yield moves inversely with price: price down → yield up; price up → yield down.
- Risk premium (credit spread): riskier corporate bonds must offer higher yield to compensate investors.
- Flight-to-quality / safe-haven demand: when perceived risk rises, investors shift funds to low-risk assets (U.S. Treasuries), increasing demand and price for Treasuries and lowering their yields.

2) Step-by-step reasoning:
- Step 1: Riskiness of corporate bonds increases (higher default/credit risk).
- Step 2: Investors respond by reducing holdings of corporate bonds and requiring a larger yield spread to hold them.
- Step 3: Reduced demand (and/or increased selling) for corporate bonds lowers their prices.
- Step 4: Because yield = coupon / price (and more generally yield ∝ 1/price), lower prices imply higher yields on corporate bonds.
- Step 5: The investors shifting out of corporates purchase safe assets (Treasuries), increasing demand for Treasuries.
- Step 6: Higher demand for Treasuries raises their prices and, by the inverse relationship, lowers their yields.

3) Intermediate steps shown in words (no numeric calculation required): corporate price ↓ → corporate yield ↑; Treasury demand ↑ → Treasury price ↑ → Treasury yield ↓.

4) Why the correct answer is correct:
The combined effect of increased required compensation for corporate credit risk and the flight-to-quality into Treasuries produces higher corporate yields and lower Treasury yields, holding other factors constant.

5) Why other options are incorrect:
- "increase; increase": Incorrect because Treasury yields typically fall (not rise) when investors flee to safety.
- "reduce; reduce": Incorrect because corporate yields should rise when risk increases, not fall.
- "reduce; increase": Incorrect because the directions are reversed for both securities relative to the risk shock.

6) Conclusion: Therefore, an increase in corporate bond risk will increase corporate yields and reduce Treasury yields. This matches the provided answer: "increase; reduce."

Question at position 33 An increase in the riskiness of corporate bonds will the yield on corporate bonds and the yield on Treasury securities, everything else held constant.increase; increase increase; reducereduce; reducereduce; increase单项选择题

类似问题

For an investor with a short holding period (e.g. a few years), which of the following is the most appropriate measurement of the rate of return for the bond investor?

Question at position 20 If inflation expectations increase, bond yields will generally:RiseStay constantFallBecome negative

A bond has a 6% coupon rate and is currently selling at a discount. Which of the following must be true?

Atlas Corporation is in sound financial condition. It sells a long-term bond. Which of the following make the interest rate on this bond lower than otherwise?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单