Credit spreads in the Merton (1974) model will be increasing, ceteris paribus, when
A) Stock volatility decreases.
B) The growth rate of the firm decreases.
C) Leverage increases.
D) The risk-free rates increase.

Name: Credit spreads in the Merton (1974) model will be increasing, ceteris paribus, when A) Stock volatility decreases. B) The growth rate of the firm decreases. C) Leverage increases. D) The risk-free rates increase.
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The Answer is C

Credit Spreads in the Merton (1974) Model Will Be Increasing