Question: 1. Use the following statements to answer questions 39-40. Statement I: Some spread risk is captured in analyzing effective duration and convexity. Statement J: A

1. Use the following statements to answer questions 39-40. Statement I: Some spread risk is captured in analyzing effective duration and convexity. Statement J: A put will reduce the effective duration of bond all else equal. Statement K: The credit term structure for highly rated securities tends to be either flat or slightly upward sloping. Statement L: The credit term structure for lower-rated securities is often steeper and credit spreads tighten with the expectations of stronger economic growth. Which statement is correct? A. Statement K B. Statement L C. Both statement K and L D. Neither statement

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