OAS on a callable bond is 75 basis points using on-the-run tre

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 11MC
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OAS on a callable bond is 75 basis points using on-the-run treasuries as benchmark rates. Which is correct?
OA. Cost of the embedded option is 75 bps
B. Cost of the embedded option is 75bps over the treasuries benchmark
OC. OAS reflects the credit risk and liquidity risk of the bond over the treasury benchmark rates
OD. Nominal spread is 75 bps over the treasury benchmark rates.
Transcribed Image Text:OAS on a callable bond is 75 basis points using on-the-run treasuries as benchmark rates. Which is correct? OA. Cost of the embedded option is 75 bps B. Cost of the embedded option is 75bps over the treasuries benchmark OC. OAS reflects the credit risk and liquidity risk of the bond over the treasury benchmark rates OD. Nominal spread is 75 bps over the treasury benchmark rates.
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