- 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
The zero-volatility spread is a better measure than the nominal yield because:
B. the nominal yield is only a one-point estimate whereas the Z-spread considers the whole yield curve.
C. the Z-spreads adjust for inflation while nominal spreads do not.
A. the nominal yield is not an effective yield measure.
B. the nominal yield is only a one-point estimate whereas the Z-spread considers the whole yield curve.
C. the Z-spreads adjust for inflation while nominal spreads do not.
Correct Answer: B
The zero-volatility spread is a better measure than the nominal yield because the nominal yield is only a one-point estimate whereas the Z-spread considers the whole yield curve.
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