A Widening of the Yield Spread Between the Yield-To-Maturity on a BBB-Rate

question 31

Multiple Choice

A widening of the yield spread between the yield-to-maturity on a BBB-rate bond and that on a AAA-rated bond indicates

• A) an increase in the default premiums of the BBB class.
• B) an increase in the default premiums of two bond classes.
• C) a decrease in the level of market risk aversion.
• D) the economic climate has turned more favorable.

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Definitions:

Elasticity of Labor Demand

A measure of how the quantity of labor demanded by employers changes in response to a change in wages or salary levels.

Close Substitutes

Products or services that can easily replace each other in consumption, showing a high level of interchangeability.

Resource Demand

The desire for resources (such as labor, capital, and natural resources) based on their contribution to the production process, influenced by factors like technological change and product demand.

Elasticity of Resource Demand

A measure of how much the quantity demanded of a resource changes in response to a change in its price.