In Response to the Financial Crisis of 2007-2009, the Yield

question 101

Multiple Choice

In response to the financial crisis of 2007-2009, the yield spread between AAA corporate bonds and treasury bonds:

• A) widened
• B) narrowed
• C) remained the same
• D) has no relationship

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Definitions:

Cash Flows

The cumulative amount of money circulating in and exiting a business, markedly influencing its liquidity position.

Effective Annual Rate

The interest rate on an investment or loan that is compounded annually, reflecting the full amount of interest paid or earned over a year.

Compounding

The process where the value of an investment increases because the earnings on an investment, both capital gains and interest, earn interest as time passes.

Rate of Return

An indicator of the efficiency of an investment, measuring how much profit or loss has been made compared to its initial cost, represented as a percentage.