8. More on types of bonds You can distinguish the various types of bonds by their terms of contract, pledge of collateral, and so on. Identify the type of bond based on each description given in the table that follows: Description Type of Bond These bonds are collateralized securities with first claims in the event of bankruptcy. These bonds are traded in the bond markets based on investors' belief that the issuer will not default on the repayment. These bonds have no collateral and usually offer higher yields. These bonds have a claim on assets only after senior debt has been paid in full. Based on your understanding of bond ratings and bond-rating criteria, which of the following statements is true? O During an economic recession and in a pessimistic environment, the yield spread between US government bonds and corporate bonds could be higher than during good economic times. O During a period of economic growth and in an optimistic environment, the yield spread between US government bonds and corporate bonds could be higher than during an economic recession and a pessimistic environment.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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8. More on types of bonds
You can distinguish the various types of bonds by their terms of contract, pledge of collateral, and so on. Identify the type of bond based on each
description given in the table that follows:
Description
Type of Bond
These bonds are collateralized securities with first claims in the event of bankruptcy.
These bonds are traded in the bond markets based on investors' belief that the issuer will
not default on the repayment. These bonds have no collateral and usually offer higher
yields.
These bonds have a claim on assets only after senior debt has been paid in full.
Based on your understanding of bond ratings and bond-rating criteria, which of the following statements is true?
O During an economic recession and in a pessimistic environment, the yield spread between US government bonds and corporate bonds
could be higher than during good economic times.
O During a period of economic growth and in an optimistic environment, the yield spread between US government bonds and corporate
bonds could be higher than during an economic recession and a pessimistic environment.
Transcribed Image Text:8. More on types of bonds You can distinguish the various types of bonds by their terms of contract, pledge of collateral, and so on. Identify the type of bond based on each description given in the table that follows: Description Type of Bond These bonds are collateralized securities with first claims in the event of bankruptcy. These bonds are traded in the bond markets based on investors' belief that the issuer will not default on the repayment. These bonds have no collateral and usually offer higher yields. These bonds have a claim on assets only after senior debt has been paid in full. Based on your understanding of bond ratings and bond-rating criteria, which of the following statements is true? O During an economic recession and in a pessimistic environment, the yield spread between US government bonds and corporate bonds could be higher than during good economic times. O During a period of economic growth and in an optimistic environment, the yield spread between US government bonds and corporate bonds could be higher than during an economic recession and a pessimistic environment.
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