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A 2%, 3-year US Treasury is selling at 100.25 . The 5% , 3-year IBM is...

A 2%, 3-year US Treasury is selling at 100.25 . The 5% , 3-year IBM is selling at 100.65. Both bonds pay interest semi-annually. The G-spread in basis points on the IBM bond is closest to

a. 264 bps.

b. 285 bps.

c. 300 bps

d. 345 bps

e. 435 bps

Solutions

Expert Solution

G-spread = Yield on IBM bond - Yield on US Treasury

G-spread = 5% - 2%

G-spread = 3%

G-spread = 300 bps

Option c is correct

jeff jeffy answered 2 years ago
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