Consider a One-Year Zero-Coupon Defaultable Bond $r$ And $S$ Denote, Respectively, the Risk-Free Interest Rate and the Spread on Denote

question 16

Multiple Choice

Consider a one-year zero-coupon defaultable bond. Let $r$ and $S$ denote, respectively, the risk-free interest rate and the spread on the bond, where both are expressed in simple terms with annual compounding. Suppose the risk-neutral probability of default $\lambda$ and the recovery rate of the bond in default $\phi$ remain fixed. Then, an increase in the risk-free rate must be accompanied by

• A) An increase in the spread.
• B) A decrease in the spread.
• C) No change in the spread.
• D) A change in the spread that can be positive, negative, or zero.

Apply hypothesis testing to compare means across groups using ANOVA.

Understand the concept of contrasts in ANOVA and their practical applications.

Interpret graphical data representations (e.g., boxplots) in the context of ANOVA findings.

Understand the concept of expected monetary value (EMV) and how it guides decision-making in uncertain conditions.