What Would You Expect to Have Happened to the Spread

question 3

Multiple Choice

What would you expect to have happened to the spread between yields on commercial paper and Treasury notes immediately after September 11, 2001?

• A)No change, as both yields will remain the same.
• B)Increase, the spread usually increases in response to a crisis.
• C)Decrease, the spread usually decreases in response to a crisis.
• D)No change, as both yields will move in the same direction.

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Definitions:

Syndicate

A group of individuals or organizations combined to promote some common interest.

Net Present Value

A financial metric indicating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Net Present Value

A method used in finance to calculate the value of a series of future cash flows in today's dollars.

Percentage-of-Completion

An accounting method used to recognize revenues and expenses of long-term contracts as a percentage of work completed during the period.