### CFA Practice Question

There are 490 practice questions for this study session.

### CFA Practice Question

Which of the following statements is correct?

A. The Z spread is greater than the G spread when the spot rate curve is downward-sloping.
B. The Z spread is the same as the G spread when the spot rate curve is flat.
C. The Z spread is lower than the G spread when the spot rate curve is upward-sloping.
Correct Answer: B

If the spot rate curve is downward-sloping, the G spread will be greater than the Z spread. If the spot rate curve is upward-sloping, the G spread will be less than the Z spread. If the spot rate curve is flat, the G spread will be equal to the Z spread.

### User Contributed Comments9

User Comment
synner in other words, spot rate curve is downward sloping, Z spread < nominal spread, and when spot rate curve is upward sloping, Z spread>nominal
danlan2 Remember this: upward, nominal spread<Z-spread; downward, nominal spread>Z-spread.
faya how i remember: z-spread exaggerates the spot rate curve. If spot curves upward, z-spread is higher. If spot curves downwards, z-spread is lower.
jwebbs yea faya's way is the easiest to remember it
Fingon Thanks for putting it in layman's terms, faya.
fanfanli Alternatively, remember the Z-Spread tracks the yield curve and will reflect its movements. Whereas the Nominal assumes one constant rate throughout.
tabulator fanfanli nailed it... BEST metaphor!
johntan1979 Sounds silly but I remember it through the alphabets...

from N down to Z, N comes first, so greater than Z.
MohitSeth1976 Alphabatical order A-z downward moving so N is bigger then z. Z-A upward moving so z is bigger then N.(easy to remember.
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