If a corporate bond’s default risk increases, its credit spread will most likely: Decrease. remain unchanged....

If a corporate bond’s default risk increases, its credit spread will most likely:

Decrease.
remain unchanged.
increase.

Solutions

Expert Solution

When a corporate bond's default risk increases, investors have
to be compensated with a higher yield. In other words,
the yield increases and the price falls.
Credit spread	Yield on corporate bond - Yield on treasury note of same maturity.
When the default risk increases, the yield on the corporate bond increases
and the credit spread increases.

C) increase.

jeff jeffy answered 1 year ago

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