We would expect the risk spread between Baa bonds and U.S. Treasury securities of the same maturities to:
A) Widen during periods of economic recession
B) Remain relatively constant over the business cycle
C) Decrease during economic slowdowns
D) Increase during economic growth periods

Question

Quizplus · Accepted Answer

During periods of economic recession, investors become more risk-averse and demand a higher return for taking on the credit risk associated with corporate bonds, causing the risk spread between Baa bonds and U.S. Treasury securities to widen.

We Would Expect the Risk Spread Between Baa Bonds and U.S