XYZ Company is about to issue two bonds to raise money to buy ABC Company. One is a 5-year bond and the other is a 10-year bond. The 5-year Treasury is yielding 2.50% and the 10-year Treasury is yielding 3%. If the companys 5-year credit spread is 125 basis points and its 10-year credit spread is 200 basis points, and the coupons of the new bonds are equal to the appropriate yields for each bond (i.e. the bond will have market value of 100%, or $1000 per $1000 face amount), then:

6. (EXTRA CREDIT) Assume XYZs credit spreads double. Give two reasons why this might happen.