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Basic Question 1 of 4

The credit spread widens during economic contractions, due to ______.

A. lower interest rates
B. increased chances of financial distress
C. reduced stock prices

User Contributed Comments 1

User Comment
johntan1979 A Interest rates are lower during economic contractions, but it does not explain the widening credit spread

C There is no correlation between stock prices and the credit spread
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Learning Outcome Statements

explain how changes in credit spread and liquidity affect yield-to-maturity of a bond and how duration and convexity can be used to estimate the price effect of the changes;

CFA® 2024 Level I Curriculum, Volume 5, Module 46.