Analyze Bond Pricing Factors
Series 65 · Flashcards
SERIES 65 · FLASHCARDS
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QUESTION
State the duration-based approximation for percent price change.
QUESTION
Identify the bond price status when coupon rate equals yield to maturity.
QUESTION
Compute the credit spread if
y
bond
=
6
%
y_{\text{bond}}=6\%
y
bond
=
6%
and
y
benchmark
=
4
%
y_{\text{benchmark}}=4\%
y
benchmark
=
4%
.
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ANSWER
2
%
2\%
2%
(or
200
200
200
basis points). Subtracting the benchmark yield from the bond yield gives
6
%
−
4
%
=
2
%
6\% - 4\% = 2\%
6%
−
4%
=
2%
, equivalent to 200 basis points.
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