Reading 63: Understanding Yield Spreads- LOS h～ Q1 relative, corporate, average, except

yangh

 

LOS h: Explain how the liquidity or issue-size of a bond affects its yield spread relative to risk-free securities and relative to other securities.

Q1. 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.

 

khaipinglai

 thanks

danforth

d

seraphiris0116

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echopapa

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JK22

山东省新城镇

tongfeibw08

 

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richardlee_2010

THANKS

 

chenavit

B

giraffe_lisa

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