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In Figure 6.9, we showed how bonds with greater credit risk have promised higher yields to maturity. This yield spread goes up when the economic
In Figure 6.9, we showed how bonds with greater credit risk have promised higher yields to maturity. This yield spread goes up when the economic outlook is particularly uncertain. You can check how much extra yield lower-grade bonds offer today by logging on to www. federalreserve.gov and comparing the yields on Aaa and Baa bonds. Look for the Economic Research & Data tab. How does the spread in yields compare with the spread in November 2008 at the height of the financial crisis?
FIGURE 6.9 Yield spreads between corporate and 10-year Treasury bonds 5 Baa-rated bonds 4 2 Aaa-rated bonds 0Step by Step Solution
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