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Basic Question 11 of 13
A risky bond is priced at $103. You take the spot curve, add 38 basis points to each rate on the curve, calculate all of the present values for the cash flows, add them up and find the sum is exactly $103. You have found the:
B. Z-spread
C. option-adjusted spread
A. nominal spread
B. Z-spread
C. option-adjusted spread
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I used your notes and passed ... highly recommended!
Lauren
Learning Outcome Statements
explain the calculation and use of option-adjusted spreads;
explain how interest rate volatility affects option-adjusted spreads;
CFA® 2025 Level II Curriculum, Volume 4, Module 28.