10. C is correct. Bond 3 is in the cyclical industry, it has a lower debt/capital ratio and a tighter
spread than Bond 2, hence should be chosen for a short position given the economic outlook
for growth. Bond 1 & Bond 2 are in the consumer staples (non-cyclical) industry. Higher-
rated issues such as Bond 1 are likely to outperform in the declining growth environment.
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