Yield spreads refer to the difference in yield between a safe government bond and a...
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Yield spreads refer to the difference in yield between a safe government bond and a risky corporate bond of the same maturity. Which of the following statements are true of the yield spread? Select one: a. The yield spread widens during recessions and narrows during expansions b. The yield spread does not change over the business cycle c. Yields on safe government bonds are always higher than yields on risky corporate bonds d. All of the above statements are true e. None of the above statements are true A stripped bond is created by an Investment Dealer who "strips" the coupons from the Corpus (or Face or Body) to create a new security with just one cash flow at some future date. What would you expect to pay for a $50,000 stripped bond with a maturity 25 years from today, given a YTM of 8%? Select one: a. $14,662 b. $12,924 c. $9,212 d. $8,776 e. $7,301
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