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Which of the following statements is​ FALSE? A. Credit spreads are high for bonds with high...

Which of the following statements is​ FALSE? A. Credit spreads are high for bonds with high ratings. B. We refer to the difference between the yields of the corporate bonds and the Treasury yields as the default spread or credit spread. C. Credit spreads fluctuate as perceptions regarding the probability of default change. D. Investors pay less for bonds with credit risk than they would for otherwise identical defaultminus free bonds.

Solutions

Expert Solution

Option A is the option which is false,

Credit spreads are high for bonds with high ratings.

Explanation:

For high rated bonds, credit spread is small as their risk of default is very low.

jeff jeffy answered 2 years ago
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