- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 14. Credit Risk
- Subject 2. Credit Rating Agencies and Credit Ratings
CFA Practice Question
"As the growth rate in real gross national product slowed, the difference in yield between BAA rated and AAA rated bonds widened." This situation is an example of ______.
B. credit spread risk
C. downgrade risk
A. default risk
B. credit spread risk
C. downgrade risk
Correct Answer: B
Business cycle conditions affect the spread in required return between securities with different credit risk classifications.
User Contributed Comments 4
| User | Comment |
|---|---|
| sarath | Business cycles affect the spread in required retuns between securities with different risk classifications.. |
| magicchip | flight to safety. |
| cong | When economy is in a bad condition, the credit spread widens. |
| 2014 | when economy is bad condition, banks reduces lending. Because credit risk rises |