CFA Practice Question

There are 147 practice questions for this study session.

CFA Practice Question

The TED spread can be used to indicate:
A. liquidity risk.
B. credit risk.
C. interest rate risk.
Explanation: The Ted spread can be used as an indicator of credit risk. This is because U.S. T-bills are considered risk-free while the rate associated with the Eurodollar futures is thought to reflect the credit ratings of corporate borrowers. As the Ted spread increases, default risk is considered to be increasing, and investors will have a preference for safe investments. As the spread decreases, the default risk is considered to be decreasing.

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