The larger the bond dealer's spread the:

Question

Quizplus · Accepted Answer

The spread refers to the difference between the bid price and ask price for a bond, which represents the profit margin for the bond dealer. A larger spread indicates that there is less liquidity in the market for that bond, meaning there may be fewer buyers and sellers willing to trade at that price. This can be due to factors such as lower trading volume or higher transaction costs. Therefore, choice A is the best answer.

Option B is incorrect because the coupon rate is determined by the issue of the bond, and is not directly related to the spread. Option C is incorrect because if the market is more liquid, the spread is likely to be smaller, as there are more buyers and sellers willing to trade at similar prices. Option D is incorrect because the risk associated with holding a bond is not related to the spread, but to other factors such as the creditworthiness of the issuer, interest rate fluctuations, and market conditions.

The Larger the Bond Dealer's Spread The