CFA论坛 - Powered by Discuz! Board

Consider three corporate bonds that are identical in all respects except as noted:

Bond F has $100 million face value outstanding. On average, 200 bonds trade per day.
Bond G has $300 million face value outstanding. On average, 200 bonds trade per day.
Bond H has $100 million face value outstanding. On average, 500 bonds trade per day.

Will the yield spreads to Treasuries of Bond G and Bond H be higher or lower than the yield spread to Treasuries of Bond F?

A)
Higher for both.

B)
Higher for one only.

C)
Lower for both.

Liquidity is attractive to investors, so they will pay a higher price (demand a lower yield) for a more liquid bond than for an identical bond that is less liquid. Bond G is more liquid than Bond F because of its greater size. Bond H is more liquid than Bond F because it trades in greater volume. Therefore both Bond G and Bond H will tend to have lower yield spreads to Treasuries than Bond F.

Relative to a bond sold as part of a large issue, an otherwise equivalent bond that is sold as part of a smaller issue will be sold for a:

A)	lower price and have a lower yield to maturity.

B)	higher price and have a lower yield to maturity.

C)	lower price and have a higher yield to maturity.

Bonds that are sold as part of a smaller issue have higher liquidity risk than bonds that are sold in a large issue. Investors will demand a higher yield to maturity to cover the liquidity risk; therefore, these bonds will be sold for less than bonds from larger issues.