In 2016,as investors became more concerned with the default risk of bonds issued by the governments of Greece and Portugal relative to the default risk on bonds issued by the governments of Germany,France,and the Netherlands,the price of bonds issued by Germany,France,and the Netherlands would have most likely ________ and the yield on those bonds would have most likely ________.
A) increased; increased
B) increased; decreased
C) decreased; increased
D) decreased; decreased

Question

Quizplus · Accepted Answer

When investors perceive higher default risk in certain bonds (like those from Greece and Portugal in this scenario), they tend to move their investments to bonds perceived as safer (such as those from Germany, France, and the Netherlands). This increased demand for the safer bonds drives up their prices. Bond prices and yields move inversely, so as the prices of these safer bonds increase, their yields decrease.

In 2016,as Investors Became More Concerned with the Default Risk