I don’t understand how this answer is C, Credit Spread Risk. The explanation in the back is even worse. Anyone? Bueller?
All three risks are present, there’s no question about that. But it seems like default risk is not short term, like the question states. And Downgrade risk doesn’t seem all that applicable because there are no review announcements that have been made (given in problem). Credit spread risk however could change tomorrow. If some announcement is made and the spread widens, investor will demand a greater yield which will obviously drive the price of the bond down - a clear risk to holders of the bond. I agree on the solution in the back of the book: It might as well have read: “‹C› comes from the same letter as ‹g›. The Semites named it gimel. The sign is possibly adapted from an Egyptian hieroglyph for a staff sling, which may have been the meaning of the name gimel. Another possibility is that it depicted a camel, the Semitic name for which was gamal.”