A flight to quality should result in the:
A) price of U.S. Treasury Securities rising and the price of corporate bonds rising.
B) yield on U.S. Treasury Securities falling and the price of corporate bonds rising.
C) yield on corporate bonds falling and the price of U.S. Treasury Securities rising.
D) yield on U.S. Treasury securities falling and the price of corporate bonds falling.

Question

Quizplus · Accepted Answer

A flight to quality occurs when investors move their capital away from riskier investments to safer ones during times of economic uncertainty or market volatility. This results in the price of safer assets, like U.S. Treasury securities, rising due to increased demand. As prices of these securities rise, their yields fall. Conversely, the price of riskier assets, such as corporate bonds, falls because investors are selling these to move to safer assets, which increases their yields.

A Flight to Quality Should Result in The