The Increase in Yield Spreads in Late 2008 and Early

question 68

Multiple Choice

The increase in yield spreads in late 2008 and early 2009 indicated that

• A) Credit risk premiums decreased
• B) Market risk premiums increased
• C) Investors are more confident of the future cash flows of bonds
• D) Non-investment grade bonds are less risky
• E) Government bonds are no longer a risk free investment

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Definitions:

Total Asset Turnover

An analysis ratio that evaluates the effectiveness of a corporation's assets in producing sales turnover.

Liquidity Ratio

Financial metrics used to assess a company's ability to meet its short-term obligations using its most liquid assets.

Net Working Capital Turnover

A ratio that measures how effectively a company uses its net working capital to generate sales.

Sales

The total revenue a company earns from selling goods or services over a specific period.