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**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).

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**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 |