Consider a 7-year 7% corporate bond with a yield-to-maturity of 5.00%. Currently, a5- and 7-year treasury bond have YTM of 2.20% and 2.60%, respectively. What is theG-spread of the corporate bond?

Corporate bonds are riskier than government bonds and hence the yield on the corporate bond is much…

Answered: Consider a 7-year 7% corporate bond…

Consider a 7-year 7% corporate bond with a yield-to-maturity of 5.00%. Currently, 5- and 7-year treasury bond have YTM of 2.20% and 2.60%, respectively. What is th G-spread of the corporate bond?

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter4: Bond Valuation

Section: Chapter Questions

Problem 14MC

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Concept explainers

Treasury Market

On-the-run securities are the most recently issued securities in the market depth and are therefore traded at some premium. The off-the-run securities are the ones issued just before the most recent ones. The on-the-run securities have a lower yield to the investor than the off-the-run securities.

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Consider a 7-year 7% corporate bond with a yield-to-maturity of 5.00%. Currently, a
5- and 7-year treasury bond have YTM of 2.20% and 2.60%, respectively. What is the
G-spread of the corporate bond?

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