AIWMI Exam CCRA-L2 Topic 9 Question 86 Discussion

Actual exam question for AIWMI's CCRA-L2 exam

Question #: 86
Topic #: 9

The following information pertains to bonds:

Further following information is available about a particular bond 'Bond F'

There is a 10.25% risky bond with a maturity of 2.25% year(s) its current price is INR105.31, which corresponds to YTM of 9.22%. The following are the benchmark YTMs.

From the time January 2013 to April 2013, what can you predict about the market conditions, assuming the GSec has not changed?

AThere has been credit spread compression, which means the spreads have declines, which can be lead indicator of oncoming economy stress.

BThere has been widening of credit spread, which means the spreads have increased, which can be lead indicator of oncoming economy stress.

CThere has been widening of credit spread, which means the spreads have increased, which can be lead indicator of oncoming economy stress.

DThere has been credit spread compression, which means the spreads have declines, which can be lead indicator of oncoming economy boom.

Show Suggested Answer

Suggested Answer: B

by Ardella at Apr 28, 2024, 02:34 PM

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Billy

16 days ago

I'm feeling lucky today, so I'm going to go with option D. Who needs logic when you can just rely on pure chance? Plus, if I'm wrong, I can always blame the market gods for not being on my side. Shake that magic 8-ball and let's see what happens!

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Stevie

23 days ago

Hmm, let's see. The bond's YTM has increased, which means the price has decreased. That's typically a sign of increasing credit risk, so option C is the way to go. Time to break out the crystal ball and start predicting the next financial crisis!

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Reed

1 months ago

Ah, the good old bond market puzzle. I'm going to go with option C, as the widening of the credit spread is a sign of potential economic trouble on the horizon. Time to start stockpiling canned goods and practicing my 'I told you so' dance moves.

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Jeanice

2 days ago

User 1: I think option C is the right choice. The widening of credit spread usually indicates economic trouble.

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2 months ago

I think the answer is A) There has been credit spread compression.

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