The Credit Spread of a Bond Shrinks If It Is

question 44

True/False

The credit spread of a bond shrinks if it is perceived that the probability of the issuer defaulting increases.

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Definitions:

Common Shares

Equity securities that represent ownership in a company, providing voting rights and a claim on a portion of the company's profits.

Financing Activities

Transactions related to obtaining or repaying capital, such as issuing equity or taking out loans.

Shareholders' Equity

The residual interest in the assets of a corporation that remains after deducting its liabilities, representing ownership interest.

Cash Flow

The total amount of money being transferred into and out of a business, especially affecting liquidity.