The Credit Spread of a Bond Increases If It Is

question 70

True/False

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

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Definitions:

Losses

Financial condition when a company's total costs exceed its total revenue, leading to a negative profit.

Market Failure

An economic situation in which the allocation of goods and services by a free market is not efficient, often leading to a net social welfare loss.

Competitive Behavior

Actions taken by companies or individuals to gain an advantage in the market, often through pricing, product differentiation, and advertising.

Externalities

Economic side effects or consequences that affect uninvolved third parties, which can be either positive or negative.