As Default Risk Increases and Bond Prices Adjust, the Expected

question 3

Multiple Choice

As default risk increases and bond prices adjust, the expected return on corporate bonds ________, and the return becomes ________ uncertain, everything else held constant.

• A) increases; less
• B) increases; more
• C) decreases; less
• D) decreases; more

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Definitions:

Femur

The longest and strongest bone in the human body, forming the thigh.

Scoliosis

A medical condition in which a person's spine has a sideways curve, usually shaped like an "S" or "C".

Lateral Curvature

Refers to a condition commonly known as scoliosis, where there's a sideways curvature of the spine.

Kyphosis

A condition characterized by an excessive outward curvature of the spine, leading to a hunchback or slouching posture.