Other things being equal, an increase in the default risk of corporate bonds shifts the demand...
Other things being equal, an increase in the default risk of corporate bonds shifts the demand curve for corporate bonds to the ________ and the demand curve for Treasury bonds to the ________.
Homework Answers
Other things being equal, an increase in the default risk of corporate bonds shifts the demand curve for corporate bonds to the Left and the demand curve for treasury bonds to the Right.
The risk level of bond also known as Default risk. It is one of the main factor which determines bond's interest rate. Corporate bonds always earn a higher interest rate than treasury bonds. So the risk associated with corporate bond is higher than treasury bonds. So that the increase in default risk causes a leftward shift of corporate bond's demand curve.
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Other things being equal, an increase in the default risk of
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