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Capital Market Expectations
Capital Market Expectations
Medium
Which statement best describes the relationship between cyclical economic variation and short-term CME for bonds?
A
In recession, central banks typically cut rates (supporting bond prices) while credit spreads widen (hurting corporate bonds relative to governments)
B
In recession, central banks raise rates to stimulate the economy while credit spreads tighten
C
Cyclical variation has minimal impact on bond returns because bonds are primarily driven by inflation expectations
D
In expansion, government bond prices rise because increased tax revenue improves sovereign creditworthiness
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Tags
#cyclical-growth
#bond-returns
#credit-spreads
#monetary-policy
#recession
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CFA Level III — Capital Market Expectations Practice Question | AcadiFi | AcadiFi