CFA Practice Question

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CFA Practice Question

Cindy Philongy wants to purchase the bond shown below. It has a BBB-rating, a coupon of 3.60% and a price of 87.8141. What is the G spread for the bond, given that the comparable maturity Treasury bond has a YTM of 5% (selling at par) and the bond has a YTM of 7.6331%?

Present Value
A. 237 basis points
B. 272 basis points
C. 263 basis points
Explanation: Candidates should try not to be distracted by extraneous information. The values shown correspond to the Z spread, not the G spread. The G spread equals the YTM of 7.6331% less the Treasury YTM of 5% = 2.6331%, or approximately 263 basis points.

User Contributed Comments 4

User Comment
Carol1 it is testing of understanding Z-yield spread and Normal yield spread
dealsoutlook its so darn confusing..why do they have to give us all this extra information??
mpapwa22 The extra information is just a trick to see if you have understood the quite weary of such questions actually......but this i got it right.
01827 you are one cheeky question...
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