Researchers Have Found a Positive Relationship Between Default Spread and Stock

question 66

Multiple Choice

Researchers have found a positive relationship between default spread and stock returns in the long run because a large default spread implies a

• A) high risk premium and higher expected returns.
• B) high risk premium and lower expected returns.
• C) low risk premium and higher expected returns.
• D) low risk premium and lower expected returns.
• E) low risk premium and the same expected returns.

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