During poor economic conditions, the spread between yields on high-grade and low-grade bonds

Question

Quizplus · Accepted Answer

During poor economic conditions, investors become more risk-averse and demand for high-quality bonds increases, causing the yields on those bonds to decrease. In contrast, demand for low-quality bonds decreases, causing the yields on those bonds to increase. Therefore, the spread between yields on high-grade and low-grade bonds increases.

During Poor Economic Conditions, the Spread Between Yields on High-Grade