Ambac Financial Group, MBIA Inc., Federal Guaranty Insurance Company, Assured Guaranty, and CIFG are some of the municipal bond insurance companies in the United States.

Municipal bond insurance companies guarantee to pay _____if the issuer defaults.

a) only the principal amount at market price

b.) both the coupon and principal payments

c.) only the coupon

Based on your understanding of bond ratings and bond-rating criteria, which of the following statements is true?

a.) During a period of economic growth and in an optimistic environment, the yield spread between U.S. government bonds and corporate bonds could be higher than during an economic recession and a pessimistic environment.

b.) During an economic recession and in a pessimistic environment, the yield spread between U.S. government bonds and corporate bonds could be higher than during good economic times.