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Basic Question 5 of 5
In general, the credit spread ______
B. widens during economic contractions.
C. remains stable over time.
A. widens during economic expansions.
B. widens during economic contractions.
C. remains stable over time.
User Contributed Comments 5
| User | Comment |
|---|---|
| nija | Credit spread is inversely propotional to expansion/contraction |
| mrushdi | During economic contraction companies have to offer a high margin to retain bond holers, otherwise being moved to treasury stock. |
| johntan1979 | Flight to quality |
| praj24 | Wiz Khalifa - flight school |
| Antoinepo | Wiz- Rooftop |
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Learning Outcome Statements
explain how the phase of the business cycle affects credit spreads and the performance of credit-sensitive fixed-income instruments;
explain how the characteristics of the markets for a company's products affect the company's credit quality;
CFA® 2025 Level II Curriculum, Volume 6, Module 37.