Question
On average, the yield spread between the AA bond and the AAA bond is 25 basis points. Currently, the yield spread is 35 basis points.
On average, the yield spread between the AA bond and the AAA bond is 25 basis points. Currently, the yield spread is 35 basis points. If you believe the yield spread will soon return to the historical average, you should ________.
Group of answer choices
buy the AAA and short the AA
short both the AA and the AAA
buy the AA and short the AAA
buy both the AA and the AAA
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Financial Management Principles and Application
Authors: Arthur J. Keown, J. William Petty, David F. Scott, Jr.
10th edition
536514119, 536514110, 978-0536514110
