The spread between interest rates on low-quality corporate bonds and U.S.government bonds ________ during the Great Depression.
A) was reversed
B) narrowed significantly
C) widened significantly
D) did not change

Question

Quizplus · Accepted Answer

During the Great Depression, the spread between interest rates on low-quality corporate bonds and U.S. government bonds widened significantly. This was due to a lack of investor confidence in companies during the economic turmoil, leading to higher perceived risk and therefore higher interest rates on corporate bonds. Meanwhile, demand for U.S. government bonds increased, leading to lower interest rates and a wider spread between the two types of bonds.

The Spread Between Interest Rates on Low-Quality Corporate Bonds and U.S.government