A wider credit spread means investors demand more compensation relative to risk-free rates. Flight to quality increases demand for safer assets such as government bonds and tends to widen corporate bond spreads.

• A is incorrect because economic expansion usually improves credit conditions and narrows spreads.
• B is incorrect because better liquidity generally narrows spreads.
• D is incorrect because an embedded put option benefits the bondholder and usually reduces required spread, unlike a call option which would generally increase spread.