The Spread (The Basis Points)between the Yields on AAA-Rated Bonds

question 27

True/False

The spread (the basis points)between the yields on AAA-rated bonds and B-rated bonds tends to rise when yields increase.

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Definitions:

Required Return

The minimum rate of return an investor expects or requires from an investment to compensate for its level of risk.

Expected Dividend Yield

A forecasted annual percentage of return that comes from dividends paid by the stock, calculated by dividing the anticipated annual dividend by the current stock price.

Expected Growth Rate

The rate at which a company, investment, or economy is anticipated to grow over a specified period.

Constant Rate

This term refers to a fixed rate over a period of time, often used in the context of financial instruments with fixed interest rates.