CFA Practice Question

There are 490 practice questions for this study session.

CFA Practice Question

The difference between nominal spread and zero-volatility spread will most likely be greatest for a mortgage-backed security ______.
A. in an inverted yield curve environment
B. with short maturity in a flat yield curve environment
C. in a steep upward-sloping yield curve environment
Explanation: The difference between the Z-spread and the nominal spread is greater for issues in which the principal is repaid over time rather than only at maturity. In addition, the difference between the Z-spread and the nominal spread is greater in a steep yield curve environment.

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