Description

These bonds are collateralized securities with first claims in the event of bankruptcy.

These bonds are not backed by any physical collateral. They are backed by the reputation

and creditworthiness of the issuing company.

These bonds are considered the riskiest of all corporate bonds and thus offer the highest

interest rates.

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

During a period of economic growth and in an optimistic environment, the yield spread between US government bonds and corporate

bonds could be higher than during an economic recession and a pessimistic environment.

During an economic recession and in a pessimistic environment, the yield spread between US government bonds and corporate bonds

could be higher than during good economic times.