Which of the following statements are TRUE? As their relative riskiness increase
ID: 1138049 • Letter: W
Question
Which of the following statements are TRUE?
As their relative riskiness increases, the expected return on corporate bonds increases relative to the expected return on default-free bonds.
The expected return on corporate bonds decreases as default risk increases.
A corporate bond's return becomes less uncertain as default risk increases.
A decrease in default risk on corporate bonds lowers the demand for these bonds, but increases the demand for default-free bonds.
As their relative riskiness increases, the expected return on corporate bonds increases relative to the expected return on default-free bonds.
The expected return on corporate bonds decreases as default risk increases.
A corporate bond's return becomes less uncertain as default risk increases.
A decrease in default risk on corporate bonds lowers the demand for these bonds, but increases the demand for default-free bonds.
Explanation / Answer
Solution
The expected return on corporate bonds decreases as default risk increases.
Reason - as per law of interest when risk come at that time co operate bond decreses because of an current market does not have expected return becuase of risk
The expected return on corporate bonds decreases as default risk increases.
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.