An active fixed-income manager is evaluating the relative performance of an investment-grade corporate versus a high-yield corporate
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An active fixed-income manager is evaluating the relative performance of an investment-grade corporate versus a high-yield corporate debt allocation in a fixed-income portfolio. Which of the following analytical model assumption changes is most likely to reduce the future value of the high-yield portfolio relative to the investment-grade holdings?
A. Steepening of the benchmark yield volatility curve
B. Decreased likelihood of an economic slowdown
C. Increased likelihood of a flight to quality associated with bullish benchmark yield curve flattening (long-term rates fall by more than short-term rates do)
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