- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 28. Valuation and Analysis of Bonds with Embedded Options
- Subject 4. Option-Adjusted Spread
CFA Practice Question
A risky bond is priced at $103. You take the spot curve, add 38 basis points to each rate on the curve, calculate all of the present values for the cash flows, add them up and find the sum is exactly $103. You have found the:
B. Z-spread
C. option-adjusted spread
A. nominal spread
B. Z-spread
C. option-adjusted spread
Correct Answer: B
It is the spread an investor would capture over the entire Treasury spot-rate curve.
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