### CFA Practice Question

There are 490 practice questions for this study session.

### CFA Practice Question

Assume that the spot rate curve is flat. Calculate the G spread on a five-year, 6.5% bond priced at \$96.91 when the spot rates are 6%.
A. 75 basis points
B. 125 basis points
C. 207 basis points
Explanation: Because the spot rates are constant, the G spread simply equals YTM - spot = 7.25 - 6.00 = 125 basis points.

User Comment
Will1868 Doesn't the YTM in this answer neglect the final cash flow of Par+final PMT = 1065?

n=5, pmt= 65, pv=-969.1, fv = 1065 solve i=8.38%

am I wrong?
johnsk yes it includes the final value otherwise the YTM would be negative. you should not include the final coupon in your future value though as it's been included already.
billou calculate the nominal spread !
awlhoaln how com not semiannual ? n=10
volkovv should be semiannual, but that doesn't change the answer:

n=10, pmt=32.5, pv=-969.1, fv=1000, solve i=3.624 * 2 = 7.248%

7.25 - 6.00 = 125 bp
clarelau Acturally we have 2 ways to calculate the yield
1. n=10,pmt=3.25 pv=-96.9, fv=100 solve i =3.624*2=7.248
2. CF0=-96.9 C01=3.25 F01=9 C02=103.25 F02=1 IRR Calculate=3.624*2=7.248

For the first one, the last coupon payment is already included in the pmt...so FV=100 instead of 103.25
Mhmdjamal for calculating interst rate by BA11
if i make FV instead of PV with negative sign, i will get different result
is it normal or i have to reset my calc??