CFA Practice Question

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CFA Practice Question

Which statement is true?

I. High-yield bonds have a higher proportion of YTM attributed to a credit spread, while investment-grade bonds have a lower proportion of YTM attributed to a credit spread.

II. The only difference between investment-grade and high-yield corporate bonds is simply the difference in credit spreads to compensate investors for assuming more or less default risk.
Correct Answer: I

II is false. Investors generally impose more constraints on high-yield issuers.

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