Question: During 2008, the difference in yield (the yeld spread) between 3-month AA-rated financial commercial paper and 3-month AA-rated nonfinanclat commerclat paper steadly increased from its

During 2008, the difference in yield (the yeld spread) between 3-month AA-rated financial commercial paper and 3-month AA-rated nonfinanclat commerclat paper steadly increased from its ustual levell ef close to remo. spiling to over a full percentage point at its peak in October 2008. Which of the following explains this sudden increase?A. The increase in the yeld spread was due to government efforts to ease the debt burden for financial companies during the financial crisis.B. The increase in the yeld spread was caused by an increase in the supply of financial commercial paper to fund fluore real estate investments.C. The increase in the yeld spread was a result of the decrease in demand for financial commercial paper doe to pee uncertainly and soundhess of financial companies and banks.D. Increased yeid spreads tend to occur because of the inelficient nature of nonfinancial commercial paper when economic instability is present.

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer
Step: 1 Unlock blur-text-image
Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock
Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!