Answer: any secured assets are likely to be sold at a higher price.

During economic expansions, recovery rates on corporate bonds tend to be higher primarily because secured assets (collateral backing the bonds) can be sold at higher prices in a stronger economy. Option A is incorrect because credit spreads typically narrow during economic expansions as default risk decreases. Option B describes default probabilities, which do affect bond prices but are not the direct reason for higher recovery rates - the key factor is the value of the underlying collateral.

Author: LeetQuiz Editorial Team