For an A- rated corporate bond that has deteriorating fundamentals, but is expected to remain investment grade, the greatest risk is most likely: A. event risk. B. default risk. C. liquidity risk. D. credit spread risk.
Probably D? A - does not change with deteriorating fundamentals B - default risk - maybe C - not a problem
I would say B but i dont hate D.
Nah, the more I think about it, it’s D. Think of it this way, if a company has deteriorating fundamentals, spreads will increase, if things continue to get bad, then it may default. But at a point in time prior to that, the greatest risk must be credit spread risk?
Gotta be D. Deteriorating fundamentals will cause the bond spread to increase.