During a recession you would expect the difference between the commercial paper rate and the yield on U.S. T-bills of the same maturity to:
A) be the same since their maturities are the same.
B) increase reflecting the possibility of higher default risk for commercial paper.
C) decrease.
D) fluctuate rarely.

Question

Quizplus · Accepted Answer

During a recession, default risk for commercial paper increases, leading to a higher spread between the commercial paper rate and the yield on U.S. T-bills of the same maturity. Therefore, choice B is the best answer.

During a Recession You Would Expect the Difference Between the Commercial