- CFA Exams
- CFA Level I Exam
- Topic 6. Fixed Income
- Learning Module 7. Yield and Yield Spread Measures for Fixed-Rate Bonds
- Subject 3. Yield Spread Measures for Fixed-Rate Bonds and Matrix Pricing
CFA Practice Question
A five-year, 2.5% T-bond is selling for $100.56, while a five-year, 4% bond issued by GM is selling for $103.74. Assume annual compounding, the G spread on the GM bond is closest to ______.
B. 80 basis points
C. 218 basis points
A. 150 basis points
B. 80 basis points
C. 218 basis points
Correct Answer: B
The yield on the T-bond is 2.38% (benchmark yield), and the yield on the GM bond is 3.18% (3.18% - 2.38% = 80 basis points).
User Contributed Comments 3
| User | Comment |
|---|---|
| kai666 | Further explanation on how to get the 2.38 and 3.18 percent? |
| shoemets | Look at earlier question explanations |
| praj24 | N=10, FV = 100, PMT= 1.25, PV = -100.56 CPT I/Y = 1.19026 x 2 = 2.38% N=10, FV = 100, PMT = 2, PV = -103.74 CPT I/Y = 1.59246 x 2 = 3.18% 3.18 - 2.38 = 80bps Simples |