If the Average Risk Premium of Corporate Bonds Increases

question 31

Multiple Choice

If the average risk premium of corporate bonds increases,

• A)the average price of corporate bonds will also increase.
• B)it's a indicator of a possible upcoming recession.
• C)interest rates on those bonds decrease.
• D)the risk premium on treasury bonds will also increase.

---

Definitions:

Relative-price Variability

Fluctuations in the price of one good or service in relation to others, affecting purchasing decisions and economic equilibrium.

Inflation Rate

A measure of how quickly the cost of goods and services rises, thereby reducing the purchasing power.

Fixed Price

A pricing strategy where the selling price of a product or service is set and not subject to change based on market fluctuations or bargaining.

Inflation Fallacy

The inflation fallacy refers to the mistaken belief that inflation erodes the real value of money without considering that wages may also rise with inflation.