Which of the Following Statements Describing a Par Curve Is

question 27

Multiple Choice

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.

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Definitions:

Collateralized Bonds

Bonds that are secured by a collateral asset, providing higher security to bondholders in case of issuer's default.

Issuing Firm

A company or entity that releases securities into the financial market for the first time, often through initial public offerings (IPOs) or bond sales.

General Earning

The total income generated by an entity from its operational activities.

Collateralized Debt Obligation

A complex structured finance product that pools together cash flow-generating assets and repackages this asset pool into tranches that can be sold to investors.