The measured credit spread widens as you move into lower and lower quality bonds i.e., the spread between long-term T-bonds and BBB bonds is higher than the spread between long-term T-bonds and AAA bonds. Where do you generally find the largest increase in the credit spread due to a single step down in credit rating? Explain.

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The Answer of The measured credit spread widens as you move into lower and lower quality bonds i.e., the spread between long-term T-bonds and BBB bonds is higher than the spread between long-term T-bonds and AAA bonds. Where do you generally find the largest increase in the credit spread due to a single step down in credit rating? Explain.

The Measured Credit Spread Widens as You Move into Lower