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Answer: Bond Y
## Explanation During a recession: - **Consumer cyclical sectors** (like consumer cyclical goods) are more sensitive to economic downturns - **Lower credit ratings** (BBB vs AAA) indicate higher default risk - **Bond Y** is in the consumer cyclical sector with a BBB rating, making it most vulnerable - Bond X has the same sector but higher credit rating (AAA) - Bond Z is in consumer non-cyclical sector (more defensive) despite having BBB rating Therefore, Bond Y is most likely to have the worst performance during a recession due to its combination of cyclical sector exposure and lower credit quality.
Author: LeetQuiz Editorial Team
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| Bond | Industrial Sector | Credit Rating |
|---|---|---|
| X | Consumer cyclical | AAA |
| Y | Consumer cyclical | BBB |
| Z | Consumer non-cyclical | BBB |
All else being equal, which bond is most likely to have the worst performance as the economy enters a recession?
A
Bond X
B
Bond Y
C
Bond Z
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