Answer: 70 basis points

## Explanation To find the Option-Adjusted Spread (OAS), we need to calculate the average present value for each spread level and find which spread makes the average PV equal to the market price of 70.17. **Step 1: Calculate average PV for each spread level:** - **50 bps spread:** (70 + 73 + 68 + 71 + 77 + 75) / 6 = 434 / 6 = 72.33 - **60 bps spread:** (68 + 70 + 66 + 69 + 75 + 73) / 6 = 421 / 6 = 70.17 - **70 bps spread:** (66 + 68 + 64 + 68 + 73 + 71) / 6 = 410 / 6 = 68.33 - **75 bps spread:** (65 + 66 + 63 + 67 + 71 + 70) / 6 = 402 / 6 = 67.00 **Step 2: Compare with market price:** The market price is 70.17, which exactly matches the average PV at 60 bps spread (70.17). **Step 3: Conclusion:** The OAS is the spread that makes the average present value equal to the market price. Since the average PV at 60 bps equals the market price of 70.17, the OAS is 60 basis points. **Answer: C (70 basis points)** - Wait, let me double-check this. Actually, looking at the calculations: - At 60 bps: Average PV = 70.17 ✓ matches market price - At 70 bps: Average PV = 68.33 ✗ doesn't match Therefore, the correct OAS is **60 basis points**, which corresponds to option **B**.

Author: LeetQuiz .