Chartered Financial Analyst Level 2

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Explanation:

Explanation

The swap spread is calculated as:

$\text{Swap Spread} = \text{Swap Rate} - \text{Treasury Yield}$

Where:

Swap Rate = 3.20%
Treasury Yield (Bund yield) = 2.65%

Calculation: $\text{Swap Spread} = 3.20\% - 2.65\% = 0.55\% = 55 \text{ bps}$

Note that the company's bond YTM (3.90%) is not used in calculating the swap spread. The swap spread represents the additional yield investors require to accept credit risk in the swap market compared to risk-free government bonds.

Answer: A

Explanation:

Explanation

The swap spread is calculated as:

$\text{Swap Spread} = \text{Swap Rate} - \text{Treasury Yield}$

Where:

Swap Rate = 3.20%
Treasury Yield (Bund yield) = 2.65%

Calculation: $\text{Swap Spread} = 3.20\% - 2.65\% = 0.55\% = 55 \text{ bps}$

Answer: A

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21 A German manufacturing company has an outstanding bond maturing in five years and trading with a YTM of 3.90%. If the 5-year Bund is yielding 2.65% and the fixed rate of a 5-year, fixed-for-float MRR swap is 3.20%, the swap spread is:

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