Consider a ten-year bond with 5% coupon issued by Good Health Food Stores. The ten-year U.S....

Consider a ten-year bond with 5% coupon issued by Good Health Food Stores. The ten-year U.S. Treasury note yields 2.5%. Which of the following is correct?

If GHFS’s credit spread widens and the Treasury yield increases, the GHFS bond price will surely decline.
If GHFS’s credit spread widens and the Treasury yield decreases, the GHFS bond price may rise or decline, depending on the relative sizes of the changes.
If GHFS’s credit spread narrows and the Treasury yield increases, the GHFS bond price will surely rise.
If GHFS’s credit spread narrows and the Treasury yield increases, the GHFS bond price may rise or decline, depending on the relative sizes of the changes.
If GHFS’s credit spread narrows and the Treasury yield does not change, the GHFS bond price will surely rise.

A,B,D,E

I have the answers but can you please explain why they are

Expert Solution

jeff jeffy answered 1 year ago

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