A decrease in the liquidity of corporate bonds will ________ the yield of corporate bonds and ________ the yield of Treasury bonds,everything else held constant.
A)increase;increase
B)decrease;decrease
C)increase;decrease
D)decrease;increase

Question

Quizplus · Accepted Answer

A decrease in the liquidity of corporate bonds makes them less attractive to investors, leading to an increase in their yield as investors demand a higher return for the added liquidity risk. Conversely, Treasury bonds, being more liquid, become relatively more attractive, potentially decreasing their yield as demand for them increases.

A Decrease in the Liquidity of Corporate Bonds Will ________