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ICMA FMFQ Exam - Topic 6 Question 62 Discussion

What is the credit spread on a corporate bond?
C) The additional yield required by investors to offset the credit risk of the security
A) The increased size of the bid/ask spread in a trade price
B) The difference in price between a corporate bond and a benchmark treasury
D) The difference between the coupon rate of a corporate bond and the dividend of the issuing company

ICMA FMFQ Exam - Topic 6 Question 62 Discussion

Actual exam question for ICMA's FMFQ exam
Question #: 62
Topic #: 6
[All FMFQ Questions]

What is the credit spread on a corporate bond?

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Suggested Answer: C

by Marsha at Jul 16, 2024, 07:19 AM

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Glenna
10 months ago
Wait, so the credit spread is really about risk? Surprising!
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Douglass
10 months ago
Definitely not option D, that's just wrong.
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Markus
10 months ago
I thought it was just the bid/ask spread, but I guess not?
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Kaitlyn
10 months ago
Totally agree, it's all about the credit risk!
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Tuyet
11 months ago
It's the difference in yield compared to treasuries, right?
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Lore
11 months ago
I vaguely remember something about the bid/ask spread, but that seems more about liquidity. I think the credit spread is more about yield and risk, possibly option C.
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Jeanice
11 months ago
I feel like the credit spread has to do with the risk premium investors demand. Option C sounds familiar, but I can't quite recall the details.
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Aleshia
11 months ago
I remember practicing a question about comparing corporate bonds to treasuries. I think the credit spread is the difference in yield between them, which might be option B.
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Irma
11 months ago
I think the credit spread is related to the yield investors expect to receive, but I'm not sure if it's specifically about the risk.
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Arlette
11 months ago
I'm a little confused on this one. Is the credit spread related to the bid-ask spread in the trading price? Or is it something else entirely? I'll have to review my notes to make sure I understand the concept properly.
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Lashunda
11 months ago
Okay, I've got this. The credit spread is the additional yield that investors demand to offset the credit risk of the corporate bond compared to a risk-free treasury. That matches option C, the additional yield required by investors to offset the credit risk.
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Lennie
11 months ago
Hmm, I'm a bit unsure about this one. I know the credit spread has something to do with the additional yield required for the credit risk, but I'm not totally sure how to calculate it. I'll have to think this through carefully.
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Galen
11 months ago
I think the credit spread on a corporate bond is the difference in price between the corporate bond and a benchmark treasury bond. That seems to match option B.
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Jacquelyne
12 months ago
I'm a bit confused by the wording of the question. I'll need to read it a few times to make sure I'm interpreting it correctly.
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Vernell
12 months ago
Hmm, I'm not sure about this one. I'll have to think it through carefully to make sure I don't miss anything.
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Nu
12 months ago
I remember from our clinical protocols that not all PVCs require immediate test stoppage. Context matters - frequency and patient symptoms are key.
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Ettie
2 years ago
I heard the credit spread on corporate bonds is just the amount of tears shed by the poor saps who bought them.
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Lavera
2 years ago
B) The difference in price between a corporate bond and a benchmark treasury
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Golda
2 years ago
C) The additional yield required by investors to offset the credit risk of the security
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Chuck
2 years ago
A) The increased size of the bid/ask spread in a trade price
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Margot
2 years ago
D? Really? The difference between the coupon rate and the dividend? That's like apples and oranges, man.
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Lewis
2 years ago
B) The difference in price between a corporate bond and a benchmark treasury
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Fausto
2 years ago
C) The additional yield required by investors to offset the credit risk of the security
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Layla
2 years ago
A) The increased size of the bid/ask spread in a trade price
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Naomi
2 years ago
Hmm, I'm torn between B and C. I guess I'll go with C, just to be safe. Credit risk, you know?
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Joni
2 years ago
I'm torn between B and C. I guess I'll go with C, just to be safe. Credit risk, you know?
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Lang
2 years ago
I'm not sure, I thought it was the additional yield required by investors to offset the credit risk of the security.
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Slyvia
2 years ago
I think the credit spread is the difference in price between a corporate bond and a benchmark treasury.
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Sherly
2 years ago
Definitely B. The difference in price between a corporate bond and a benchmark treasury. Easy peasy!
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Juliana
2 years ago
Yes, that's correct. The credit spread reflects the risk of default by the issuer, which is why investors demand a higher yield.
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Ariel
2 years ago
Hmm, that makes sense. So it's more about the risk associated with the bond rather than just the price difference?
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Ellen
2 years ago
I think the correct answer is C. The additional yield required by investors to offset the credit risk of the security.
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Lacey
2 years ago
Agreed. Credit spread is a key factor to consider when evaluating corporate bonds.
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Evangelina
2 years ago
That makes sense. It's important for investors to be compensated for taking on that risk.
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Janae
2 years ago
I think the correct answer is C. The additional yield required by investors to offset the credit risk of the security.
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Gearldine
2 years ago
I disagree, I believe it's the additional yield required by investors to offset the credit risk of the security.
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Ariel
2 years ago
I think the credit spread on a corporate bond is the difference in price between the bond and a benchmark treasury.
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