Typically, during a recession the spread between the highest- and medium-grade-rated municipal bonds
A)narrows.
B)remains the same.
C)overlaps.
D)widens.

Question

Quizplus · Accepted Answer

During a recession, investors become more risk-averse, leading to a decrease in demand for lower-quality medium-grade-rated municipal bonds. This can widen the spread between the yields of high-grade and medium-grade bonds as investors flock to safer investments, causing the prices of riskier bonds to fall and the yields to rise.

Typically, During a Recession the Spread Between the Highest- and Medium-Grade-Rated