The spread between interest rates on low quality corporate bonds and Canada bonds ________.
A) widens significantly during recessions
B) narrows significantly during recessions
C) narrows moderately during recessions
D) does not change during recessions

Question

Quizplus · Accepted Answer

The spread between interest rates on low quality corporate bonds and Canada bonds widens significantly during recessions. This is because investors become more risk averse during economic downturns and demand higher returns for investing in riskier corporate bonds, leading to an increase in the spread between the two interest rates.

The Spread Between Interest Rates on Low Quality Corporate Bonds