The risk spread on bonds fluctuates mainly because:
A) taxes tend to increase over time.
B) bond rating agencies are often inconsistent.
C) new information about a borrower's financial condition becomes available.
D) people do not change their attitudes towards risk quickly.

Question

Quizplus · Accepted Answer

The risk spread on bonds fluctuates mainly because new information about a borrower's financial condition becomes available. As new information becomes available, investors reassess the risk of default and the price of the bond shifts accordingly.

The Risk Spread on Bonds Fluctuates Mainly Because