Why should I choose AnalystNotes?

AnalystNotes specializes in helping candidates pass. Period.

Find out more

Basic Question 10 of 14

You have applied your favorite valuation model to a bond with an embedded option and found an option-adjusted spread (OAS) of 40 basis points, while the Z-spread has been calculated at 207 basis points. What is the option cost?

A. 167 basis points
B. 185 basis points
C. 207 basis points
Check Answer Previous Q Next Q Print

User Contributed Comments 4

User Comment
olagbami option cost: z spread-OAS
bodduna Z spread = OAS + Option Cost
CJPerugini If OAS < Zspread, then Call Option
If OAS > Zspread, then Put Option
tomalot My favorite bond valuation model...how can I choose just one!?
You need to log in first to add your comment.
I just wanted to share the good news that I passed CFA Level I!!! Thank you for your help - I think the online question bank helped cut the clutter and made a positive difference.
Edward Liu

Edward Liu

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.