Question

During the credit crisis of 2008, investors around the world were fearful about the collapse of real estate markets, shaky stock markets, and illiquidity of several securities in the United States and several other nations. The demand for US Treasury bonds increased, which led to a rise in their price and a decline in their yields.

A) True
B) False

Answer 1

The statement in this question is true.

Answer: Option A.

Step-by-step explanation:

With the collapse in the real estate markets, in the collapse of the stock markets or the illiquidity of the securities in the United States of America, the demand for the treasury bonds of the country increased because people wanted to have some kind of investment and security in their hands.

But with the increase in the demand of these bonds of the country, there led to an increase in the price of the bond because the demand was more and the supply was less of these bonds. As a result of this the yield to be recovered from these bonds reduced.