If investors become more risk averse, the yield spread between corporate bonds and Treasury bonds will:
Click on the arrows to vote for the correct answer
A. B. C. D.A
As investors become more risk averse, they will demand more risk-free assets. Hence, thedemand for Treasury bonds will increase and that for the corporate bonds decrease. Thiswill increase the yields on corporate bonds and decrease those on Treasury bonds, thus widening the spread.