You Are Trying to Find the Correct Yield Spread for a Standard

question 28

Multiple Choice

You are trying to find the correct yield spread for a Standard and Poor's rated A+,7-year maturity bond.You find that a 7-year maturity,AA- bond's spread is 65 basis points while that of a 7-year maturity A bond's spread is 80 basis points.Which of the following should be a possibility for the spread of the A+ rated bond?

• A) 64 basis points
• B) 70 basis points
• C) 80 basis points
• D) both b and c are possible spreads for the bond.

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Definitions:

Stockholders

Individuals or entities that own one or more shares of stock in a corporation, thus holding a portion of the company's equity.

Journal Entry

A record in the accounting books that notes all the financial transactions of a business.

Accounts Receivable

Money owed to a business by its clients (customers) resulting from the sale of goods or services on credit.

T Accounts

A tool used in accounting to represent the debit and credit sides of a transaction for individual accounts.