1.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    Higher

B)                                        Higher    Lower

C)                                        Lower    Lower

D)                                        Lower    Higher

答案和详解如下：

1.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?

Bond G

Bond H

A)                                        Higher    Higher

B)                                        Higher    Lower

C)                                        Lower    Lower

D)                                        Lower    Higher

The correct answer was C)

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.