Compared with a U.S. Treasury note, a corporate bond is likely to have a
A) wider bid-asked spread.
B) narrower bid-asked spread.
C) higher bid price.
D) higher asked price.

Question

Quizplus · Accepted Answer

Corporate bonds are generally considered to be riskier investments than U.S. Treasury notes because there is a greater possibility that the corporation could default on its debt obligations. As a result, investors demand a higher return on their investment in the form of a higher interest rate. This increased risk also leads to a wider bid-asked spread, meaning there may be greater differences between the price at which a buyer is willing to buy the bond and the price at which a seller is willing to sell the bond.