What would you expect to have happened to the spread between yields on commercial paper and Treasury bills immediately after September 11,2001?
A) No change, as both yields will remain the same.
B) Increase, the spread usually increases in response to a crisis.
C) Decrease, the spread usually decreases in response to a crisis.
D) No change, as both yields will move in the same direction.

Question

Quizplus · Accepted Answer

The spread between yields on commercial paper and Treasury bills typically increases during a crisis because investors seek the safety of Treasury bills, driving their yields down, while the perceived risk of commercial paper increases, driving its yields up.

What Would You Expect to Have Happened to the Spread