Bond A has a yield-to-maturity of 8%; Bond B at 6.5%. The yield spread in basis points is

Question

Quizplus · Accepted Answer

Yield spread is typically measured in basis points, which is 1/100th of a percentage point. Therefore, a spread of 150 basis points is equivalent to 1.5%. Choice D is the only option that represents a reasonable yield spread for a bond. A spread of 150 basis points would be considered a significant spread, indicating a higher credit risk for the bond issuer compared to a benchmark like a US Treasury bond.

Bond a Has a Yield-To-Maturity of 8%; Bond B at 6.5