- CFA Exams
- CFA Level I Exam
- Study Session 15. Fixed Income (2)
- Reading 46. Understanding Fixed-Income Risk and Return
- Subject 8. Credit and Liquidity Risk
CFA Practice Question
Credit spreads become wider during economic contractions, as investors tend to sell off low-quality corporate issues and invest the proceeds in government bonds. A change in yield-to-maturity in this case could be caused by a change in the ______.
II. credit risk
III. liquidity risk
I. benchmark yield
II. credit risk
III. liquidity risk
Correct Answer: I, II and III
This is known as "flight to quality". All three could change during economic contractions.
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