Seeing is believing!

Before you order, simply sign up for a free user account and in seconds you'll be experiencing the best in CFA exam preparation.

Basic Question 6 of 14

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.

User Contributed Comments 9

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.
You need to log in first to add your comment.
You have a wonderful website and definitely should take some credit for your members' outstanding grades.
Colin Sampaleanu

Colin Sampaleanu

Learning Outcome Statements

compare, calculate, and interpret yield and yield spread measures for fixed-rate bonds

CFA® 2025 Level I Curriculum, Volume 4, Module 7.