If S&P upgrades a corporate bond the _____ for the bond will shift and its risk premium will
A) demand; rise.
B) demand; fall.
C) supply; rise.
D) supply; fall.

Question

Quizplus · Accepted Answer

When S&P upgrades a corporate bond, it signals a lower risk associated with the bond. This makes the bond more attractive to investors, increasing its demand. As demand increases, the risk premium, which is the extra yield over a risk-free rate that investors require to compensate for the risk, will fall because the bond is now considered safer.

If S&P Upgrades a Corporate Bond the _____ for the Bond