Question content area

Part $1$

Impact of Weak Economy on Bond Prices. Explain why prices of risky bonds may decline when economic conditions weaken.

Part $2$

During a weak$$ economy,$($Select the best answer$$ below.$)$

A$.$

the risk of default on bonds may rise and you could only sell your holdings of these bonds to other investors if you are willing to sell them at a lower price to reflect the high risk of these bonds.

B$.$

the risk of default on bonds may rise and you could only sell your holdings of these bonds to other investors if you are willing to sell them at a higher price to reflect the high risk of these bonds.

C$.$

the risk of default on bonds may decline and you could only sell your holdings of these bonds to other investors if you are willing to sell them at a lower price to reflect the low risk of these bonds.

D$.$

the risk of default on bonds may decline and you could only sell your holdings of these bonds to other investors if you are willing to sell them at a lower price to reflect the high risk of these bonds.