Which of the following statements describing a par curve is incorrect?
A) A par curve is obtained from a spot curve.
B) All bonds on a par curve are assumed to have different credit risk.
C) A par curve is a sequence of yields-to-maturity such that each bond is priced at par value.

Question

Quizplus · Accepted Answer

All bonds on a par curve are assumed to have the same credit risk, as they are priced at par value. The differences in yields-to-maturity along the curve are due to differences in maturity and other factors affecting the yield, such as liquidity and market demand.

Which of the Following Statements Describing a Par Curve Is