Reading 65: Understanding Yield Spreads - LOS g ～ Q1-2 equivalent, should, style, black, class

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1.As compared to an equivalent nonputable bond, a putable bond’s yield should be:

A)   higher.

B)   the same.

C)   lower.

D)   Not enough information to determine.

2.As compared to an equivalent noncallable bond, a callable bond’s yield should be:

A)   lower.

B)   higher.

C)   the same.

D)   Not enough information to determine.

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答案和详解如下：

1.As compared to an equivalent nonputable bond, a putable bond’s yield should be:

A)   higher.

B)   the same.

C)   lower.

D)   Not enough information to determine.

The correct answer was C)

A putable bond favors the buyer (investor). Hence, a premium will be paid for the option, which means the yield will be lower.

2.As compared to an equivalent noncallable bond, a callable bond’s yield should be:

A)   lower.

B)   higher.

C)   the same.

D)   Not enough information to determine.

The correct answer was B)

A callable bond favors the issuer. Hence, the value of the bond is discounted by the value of the option, which means the yield will be higher.